Federal reserve rate cuts

3rd March 2020

• reduce interest rates from 1.5-1.75% to 1-1.25%
• purchase of government bonds
• purchase of agency back mortgage securities

15th March 2020

• reduce interest rates from 1-1.25% to 0-0.25%
• effects are in very early stage within the US
• First signs affected industries
  • Tourism
  • Hotel
  • Travel industry
  • otherwise not showing up in data but sentiment forecasts

Key take aways

• mandate
  • maximum employment
  • price stability
• Context
  • Economy propped up by US consumers
  • US unemployment is low
• Dealing with corona issue
  • Actual impact of US economy is uncertain
  • Ultimate solution will come from health professionals
  • Broader spread of the virus is what changed hence potential risk to the economy
  • Uncertain how long the economy will take to recover
  • Health care, Fiscal and Monetary policies