|March 3, 2020
Keeping Current: Special Report
The Fed cuts its target rate to combat the impact of the coronavirus
|The Federal Reserve lowered its target range for the federal funds rate this morning to buffer the economy from the risks of the coronavirus.
The target range, the Fed’s primary policy lever for short-term interest rates, was cut by 50 basis points and is now 1.00% to 1.25%.
The move came two weeks before its next regularly scheduled policy meeting on March 17-18. It’s the first change in the benchmark rate since the 2008 financial crisis to occur outside of a scheduled meeting, which are generally held about six weeks apart. The vote to take the action was unanimous.
The Fed’s announcement also said that “[t]he fundamentals of the U.S. economy remain strong.”
The last change in the benchmark rate, which took effect on October 31, was a 25-basis point reduction.
Meanwhile, the 10-year Treasury note closed at 1.10% yesterday, an all-time historic low. It averaged 1.76% in January and 1.50% in February. In the last week of February, it averaged 1.29%.
Analysis from the Wells Fargo Economics Group: Fed Cuts Rates 50 bps—Further Easing Likely in Store
“Open Market Operations,” Federal Open Market Committee, Board of Governors of the Federal Reserve System, March 3, 2020. www.federalreserve.gov/monetarypolicy/openmarket.htm.
“Daily Treasury Yield Curve Rates,” U.S. Department of Treasury, March 3, 2020. Only daily closing yields are quoted and used for monthly averages. www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield.