As expected, the Federal Reserve announced today that it would hold the target range for the federal funds rate at 0 to 0.25% as the U.S. continues to weather the economic challenges of the coronavirus pandemic. The committee noted that “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 near term.”
In a press conference this afternoon, Fed Chairman Jerome Powell noted that the “next few months will be very important in learning with the real story will be” with respect to the trajectory of the economy as states and local governments continue lifting stay-at home orders. Powell noted that if the coronavirus is able to be controlled, the Fed expects to see a “historically weak second quarter,” followed by “an expansion that builds momentum over time.” He noted that additional monetary and fiscal policy actions may be needed, though he added that “ultimately, we do see a full recovery over time.”
The Fed also noted that it plans to increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities “at least at the current pace” over the coming months in order to ensure smooth market functioning. Powell also said that “we are now in the final run-up” to launching the long-awaited Main Street Lending Program, and noted that changes made earlier this week will help ensure the MSLP is “better able to achieve its goals” of providing support to businesses.
