March 03, 2020
Based on the Federal Open Market Committee (FOMC) assessment, the U.S. economy remains robust, however the coronavirus poses sprouting risks to activity within the economy. The FOMC lowered the target range for the federal fund rate by 0.5%e point to 1% – 1 ¼% to support achieving its maximum employment and price stability goals. The FOMC reiterated its commitment to closely monitoring developments and their implication for the economic outlook and will use its tools and act as appropriate to support the economy.
The FOMC also stated, “Effective March 4, 2020, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 1 to 1-1/4 percent. In light of recent and expected increases in the Federal Reserve’s non-reserve liabilities, the Committee directs the Desk to continue purchasing Treasury bills at least into the second quarter of 2020 to maintain over time ample reserve balances at or above the level that prevailed in early September 2019.
The desk under the directive of the Committee will carry on conducting term and overnight repurchase agreement operations at least through April 2020. The FOMC notes with will, “ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation.”
“Additionally, the Committee directs the Desk to conduct overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 1%, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.”
In a connected action, the Board of Governors of the Federal Reserve System voted unanimously to approve a 0.5% point decline in the primary credit rate to 1.75%, effective March 4, 2020.
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