Written by Steven Hansen
Following President Trump’s repeated calls for the Federal Reserve to lower the federal funds rate, the Federal Open Market Committee (FOMC) today lowered the federal-funds rate to a range between 1% and 1.25%
The following statement was issued by the Federal Reserve:
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.
How effective will a 1/2 % reduction in the federal funds rate be when one considers the federal funds rate was never raised very much from the last recession?
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