Fed Open Market Committee policy announcement expected on Wednesday
The Federal Reserve Open Market Committee will issue a statement today regarding recent interest rate policy in the US.
On Sunday, Chairman Jerome Powell announced that rates would be lowered to between zero and 0.25%, a first since the 2008 financial crisis. The historic move comes off the heels of a disastrous week in which the COVID-19 pandemic roiled markets. The Reserve’s expanded response has been to buy up $700 billion worth of US government securities in an effort to enact quantitative easing. The policy aims to stimulate the market enough for it to remain free-flowing in the absence of consumer activity.
While lower interest rates mean cheap borrowing for businesses, it doesn’t do much for their bottom line. The Reserve’s monetary policy is unlikely to solve the larger issue of sluggish commercial activity as people increasingly isolate themselves at home due to the threat of the virus. This reality is reflected in the US energy industry, which has seen market losses of 47%. The government will likely enact corrective proposals, potentially ranging from injections into major industries to writing every American a $1000 cheque.
However, these actions do little to address the COVID-19 outbreak’s impact on the global economy, which some predict will shrink it by 1.2%. While sceptics counter that the markets will make a rebound come summer, expect an unprecedented economic downturn, potentially rippling through the years to come.
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