Keeping Current: Special Report

The Fed cuts its target rate to combat the impact 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

Sources:
FOMC statement, Board of Governors of the Federal Reserve System, March 3, 2020. www.federalreserve.gov/monetarypolicy/fomccalendars.htm.

“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.