Market update: U.S. Fed cuts interest rates to near zero
Market Watch – March 16, 2020
March 16, 2020
Last night, before the open of Asian markets, the U.S. Federal Open Market Committee (FOMC) reduced the target range for the federal funds rate to 0%-0.25% and announced a minimum US$700 billion asset purchase program (“QE4”), consisting of at least US$500 billion of U.S. Treasury securities and at least US$200 billion of mortgage-backed securities. The Fed is also ceasing the run-off of these securities from its existing portfolio. The changes come in the wake of measures by governments around the world to slow the spread of coronavirus, which has brought the global economy to a standstill. The FOMC, recognizing that “the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook”, took the action it did in an effort to fulfill its dual mandate of maximum employment and price stability (2% inflation). The Committee added that any future adjustments to monetary policy will also be made in this context.
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