The Federal Reserve on Sunday evening slashed interest rates to zero in a dramatic move to boost the economy and keep borrowing costs as low as possible for consumers and businesses in the wake of the coronavirus crisis. The Fed reduced the federal funds target rate by a full percentage point, from 1% to 1.25% down to 0% to 0.25%.
NAHB Chief Economist Robert Dietz provides analysis on how the Fed action will provide a stimulus to the economy and housing in this Eye on Housing blog post.
In an official statement, the Fed said: “The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4%. 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 moves comes less than two weeks after the Fed made an emergency 50-point basis rate cut and pledged to purchase $1.5 trillion in bonds to keep the financial markets from seizing up.
In today’s announcement, the Fed also announced that in order to support the smooth functioning of markets for Treasury securities
agency mortgage-backed securities that are central to the flow of credit to households and businesses, the central bank will purchase at least $500 billion of Treasury bonds and $200 billion of mortgage-backed securities over the coming months.