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Federal Reserve Pledges To Maintain 0% Interest Rates Until It Hits Employment, Price Stability Goals

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Federal Reserve Pledges To Maintain 0% Interest Rates Until It Hits Employment, Price Stability Goals

In a move that was widely expected, the U.S. Federal Reserve maintained its current fed funds target range of 0% to 0.25% on Wednesday, as the U.S. economy continues to struggle to manage the COVID-19 coronavirus outbreak.

“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 Fed said in a statement.

Investors aren’t expecting the Fed to take much action on the interest rate front for quite a while. The bond market is currently pricing in a 100% chance interest rates will stay in their current range through at least March of 2021, according to CME Group.

All 10 Fed members voted unanimously to maintain current rates.

The latest Fed commentary comes the same day the Bureau of Economic Analysis reported U.S. GDP dropped 4.8% in the first quarter due to the outbreak. Goldman Sachs economists are projecting a 5% drop in second-quarter GDP as well.

Markets React

The Federal Reserve issued two emergency interest rate cuts totaling 1.5% in March in response to the outbreak and has provided access to more than $2.3 trillion in loans to support the economy.

As recently as December, the Federal Reserve said it anticipated no adjustments to interest rates in 2020.
The SPDR S&P 500 ETF Trust (NYSE: SPY) traded higher by 2.5% on the day.

The yield on 10-year U.S. Treasury bonds declined slightly on Tuesday to 0.606%, down 0.002% on the day.

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