At two emergency meetings within two weeks in March, U.S. central bank's policy-setting Federal Open Market Committee (FOMC), slashed its federal funds rate by 150 basis points and has cut its five times by a total of 2.25 percentage points since it began easing in July 2019.
In addition, the Fed has launched a vast array of monetary tools to cushion U.S. households and businesses from the damage from the efforts to contain Covid-19.
This includes buying Treasury securities, agency residential and commercial mortgage-backed securities to ensure its easy policy is transmitted to the economy.
The Fed said it would continue with these purchases while its open market desk in New York will continue to offer large-scale overnight and term repurchase agreements and is "prepared to adjust its plans as appropriate."
"The ongoing public health crises 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," the Fed said.
The impact of the virus is already causing sharp declines in economic activity - the U.S. gross domestic product shrank by 4.8 percent in the first quarter - and pushed up unemployment sharply.
Weaker demand and lower oil prices will hold down inflation, the Fed said, adding it was "committee to using its full range of tools to support the U.S. economy in this challenging time" and expects to maintain its federal funds rate "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 FOMC was unanimous in its policy decision.
The Board of Governors of the Federal Reserve System issued the following statement by its Federal Open Market Committee (FOMC):
"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."
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