- As expected, the Federal Open Market Committee (FOMC) left the federal funds rate at the effective lower bound range of 0 to ¼ percent.
- As it noted in its mid-March statement it “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 statement modified its risk assessment, noting that in addition to the near-term impact on economic activity, employment and inflation, the public health crisis “poses considerable downside risk to the economic outlook over the medium term” (emphasis added to show change from March statement).
- The statement also noted the continuation of its large scale asset purchases and repurchase operations.
Key Implications
- Not much new in this statement. Having brought rates down to the lower bound and announcing a number of emergency lending programs and facilities, the Fed’s attention now is on getting the last of these up and running.
- There were no new forecasts in this statement, but it certainly recognized the unprecedented nature of the economic shock, its negative implications for inflation and employment and the risks these pose to the economic outlook over the longer run. It also called out impaired financial conditions, which goes a long way to explaining the scope of its financial interventions.
- All ears will be on Chairman Powell’s virtual press conference for more on how the Fed sees the evolution of risks and its next actions to support the economy.
