Federal Reserve Leaves Interest Rates Near Zero for Pandemic

July 30, 2020
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The Federal Reserve, recognizing the difficult position the economy is in today, voted to keep interest rates at zero in its latest policy meeting. The Board of Governors of the Federal Reserve System voted unanimously on Wednesday to maintain the official money rate at 0.00% to 0.25%.

In a statement, the board noted that the health of the economy is directly tied to the Coronavirus Pandemic, confirming what many Americans have known since the outbreak led to statewide shutdowns earlier this year.

The Fed Cites Health Crisis in Press Release

In a statement released on Wednesday, the Board of Governors said that the Coronavirus Pandemic is “causing tremendous human and economic hardship” and that both economic activity and employment are “well below their levels at the beginning of the year.”

The statement also noted low oil prices, which have helped to keep consumer price inflation in check.

Understanding that it needs to help support credit activities like borrowing and lending, the Board of Governors also promised to “increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities.”

Investors hoping for a swift economic recovery will find some concerning sentiments coming out of the Fed this week. Chairman Jerome Powell spoke at a press conference after the official meeting, saying that “What the data shows is that the pace of the recovery looks like it has slowed since the cases began that spike in June.” He continued to note that “It looks like the data are pointing to the slowing in pace in the recovery.”

After major shutdowns earlier this year, states began to open their economies again. Some were clearly too quick to relax social distancing and lockdown orders. Daily Coronavirus cases are now rising towards their previous peaks. Locations like Florida and Texas have become hotbeds for viral activity. The United States has confirmed more than 4.5 million infections and deaths have exceeded 152,000.

Federal Reserve Low-Interest Rates are Beneficial

Despite some unwelcome circumstances, today’s near zero interest rate is actually an advantage for consumers and organizations. It decreases the cost of borrowing, which can boost financial flexibility. The home market has seen a direct benefit, with some of the lowest mortgage rates in recent years.

Economic recovery may be a long way off, but it’s reassuring to see that the Fed is using all of its tools to help support the financial system in the meantime.

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