St. Louis Fed President James Bullard warned that the risk of a financial crisis remains. He said “without more granular risk management on the part of the health policy, we could get a wave of substantial bankruptcies and could feed into a financial crisis,”

Hence, “it’s probably prudent to keep our lending facilities in place for now, even though its true that liquidity has improved dramatically in financial markets.” The idea to is to make sure that markets don’t freeze up entirely in the twists and turns of a crisis.

Atlanta Fed President Raphael Bostic signaled a more cautious stance on interest rate hikes, contrary to someof his peers’ sentiments. he said, “I don’t see as much urgency to move as stated by others, including my Chair,” expressing his willingness to assess further signs of economic slowdown before advocating for more aggressive action.

Bostic highlighted the fact that Fed has “only been in restrictive territory for 8-10 months”. He is waiting for “more signs that a slowdown is happening in the next several months”.

Nevertheless, Bostic left room for adaptability based on incoming data. He remarked, “If inflation moves away from target or seems to significantly stall out, then we’ll probably have to do more.” However, he also noted that, “We’re not seeing either of those right now.”

Fed keeps federal funds rate unchanged at 0-0.25% as widely expected. The forward guidance is unchanged too. “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

Full statement below.

Federal Reserve Issues FOMC Statement

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses.

The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor market conditions and is prepared to adjust its plans as appropriate.

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.