March 15, 2020

Northwest FCS News

Meeting Date:  March 15, 2020

Federal Open Market Committee (FOMC) March 15, 2020 emergency unscheduled meeting (In lieu of the March 17-18 regularly scheduled meeting)

Fed conducts 3 emergency, unscheduled meetings to combat the economic impact of the Coronavirus pandemic

Fed cuts rates to 0.0%

Announces $1.5 trillion Repurchase Agreement Program

Begins expansion of its balance sheet by at least $700 billion in QE securities purchases

Reserve requirement ratio reduced to 0.0%

Meeting Location: Marriner S. Eccles Federal Reserve Board Building, Washington DC

Economic Highlight:
FOMC attempts to reduce the economic damage caused by the Coronavirus in three seperate policy moves.
  • On March 3, the Fed slashed rates by ½%. The Fed noted, “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1 1/4 percent.
  • On March 12, The Federal Reserve Bank of New York announced a major Repurchase Agreement (REPO) program to keep the financial markets liquid. The New York Fed began to offer $1.5 trillion in short-term loans to banks to “address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak”: $500 billion on Thursday, March 12; $1 trillion, in two batches, on Friday, March 13; and another $500 billion each week for the rest of the month.
  • On March 15, the Fed cut its target rate range to 0.0%-0.25% from 1.0%-1.25%. In addition, it announced a $700 billion securities purchase program (QE), and lowered the reserve ratio requirement to 0.0% for all financial institutions. Finally, the Fed announced a few minor policy changes all aimed at keeping the financial markets liquid.
  • These minor changes to policy include … “measures related to the discount window, intraday credit, bank capital and liquidity buffers, reserve requirements, and—in coordination with other central banks—the U.S. dollar liquidity swap line arrangements.”


Fed rationale:
The unusual Fed activity in the first two weeks of March 2020 all originated from the Fed's desire to reduce an/ or prevent additional economic damage to the economy from the Coronavirus pandemic.
  • “The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected.
  • Available economic data show that the U.S. economy came into this challenging period on a strong footing. Information received since the Federal Open Market Committee met in January indicates that the labor market remained strong through February and economic activity rose at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low.
  • Although household spending rose at a moderate pace, business fixed investment and exports remained weak. More recently, the energy sector has come under stress.
  • On a 12 month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; survey-based measures of longer-term inflation expectations are little changed.”


Forward Guidance
The Fed indicated that zero interest rates and additional QE injections would likely continue until the danger from the Coronavirus ends.
  • “The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook.
  • 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.
  • This action will help support economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective.
 Voting Results
One dissenting vote at the March 15 meeting!.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Randal K. Quarles. Voting against this action was Loretta J. Mester, who was fully supportive of all of the actions taken to promote the smooth functioning of markets and the flow of credit to households and businesses but preferred to reduce the target range for the federal funds rate to 1/2 to 3/4 percent at this meeting.

Next Meeting:  April 28-29, 2020


The preceding information contains excerpts from an official published statement on the Federal Open Market Committee’s March 15, 2020 meeting.  For full text, please visit the Federal Reserve website.