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Fed cuts rates amidst coronavirus continuation, signals market support
The Federal Reserve cut interest rates by 50 basis points Tuesday in efforts to mitigate the potential economic effects of the coronavirus, also referred to as COVID-19. The federal funds target rate is now set at a range of 1 to 1.25 percent.
In regards to the spread of the coronavirus, NAFCU is closely monitoring the situation on a daily basis and encourages its members and stakeholders to follow government updates to stay informed of the newest developments and guidance. The association has also shared resources to ensure credit unions have appropriate business continuity plans in place.
"While a rate cut doesn’t do much to solve the economic and financial consequences of COVID-19, it at least reassures markets that the Fed is ready to offer whatever support it can," said NAFCU Chief Economist and Vice President of Research Curt Long. "And it refocuses policymakers on fiscal responses which are more likely to have a real impact.
"For its part, the Fed will be hoping that markets remain relatively stable while more data comes in," Long added. "But with the virus spreading and plenty more room for mitigation response, the risks are still heavily weighted to the downside, and more rate cuts are likely to follow."
The committee last lowered the federal funds target rate to its previous range of 1.5 to 1.75 percent at the end of its October meeting, the third rate cut of 2019. Minutes from the committee's January meeting reflected that economic activity had risen at a moderate rate, with Long predicting the coronavirus' disruption to China's economy and the potential for spillover to other countries as the biggest threat to a stable rate outlook.
Find more information on the coronavirus with these resources:
- The Centers for Disease Control and Prevention (CDC)
- World Health Organization (WHO)
- Remarks at U.S. Department of Health and Human Services (HHS) press briefing on the Administration’s response
The FOMC will next meet March 17-18, 2020; its tentative meeting schedule for 2020 can be viewed here. Stay tuned to NAFCU Today for updates.