Economic Flash

Fed Cuts Rates as Economic Impact of Coronavirus Grows


by Craig Dismuke, Dudley Carter

Fed Cuts Rates as Economic Impact of Coronavirus Grows

The FOMC voted unanimously to cut its overnight target range 50 basis points to 1.00% – 1.25% in an intra-meeting decision.  In their brief statement accompanying the emergency policy action, the Fed noted that “the coronavirus poses evolving risks to economic activity.” The statement also notes that “the fundamentals of the U.S. economy remain strong.”  However, the expected economic impact of the coronavirus is growing.  The transmission to the U.S. economy will occur via disruptions to the supply chain, weakness in global demand as Asian and European growth falter, disruptions in travel and tourism, and deterioration in financial conditions.  Fed Chair Powell will host a press conference at 10:00 a.m. CT.

Going forward, if containment efforts persist in disrupting economic activity, the U.S. economy would likely face recessionary conditions resulting in the Fed cutting even more aggressively. For now, Fed Funds Futures contracts project that the Fed will cut another 50 basis points before year-end.


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Federal Reserve Statement

March 3, 2020

The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1‑1/4 percent. The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.


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