Fed cuts discount rate for the first time in 2020
The Federal Reserve has held an emergency meeting for the first time since the global financial crisis in 2008.
The US Federal Reserve on Tuesday, March 3, at the first emergency meeting since 2008, lowered the rate by half a percentage point to 1-1.25% per annum. According to the Federal Committee for Open Market Operations, this was done as part of the fight against risks due to coronavirus.
вЂњThe fundamentals of the American economy remain strong. However, coronavirus creates new risks for economic activity. In light of these risks and in support of achieving maximum employment and price stability, the FOMC today decided to reduce the target range of the federal funds rate by 0.5 percentage points вЂ” up to 1-1.25%, вЂњthe report said.
Recall that last fall the US Federal Reserve reduced the base interest rate by 25 basis points for the third time in a year, to 1.5-1.75%.
The basic rate is the percentage at which banks provide each other with unsecured loans for one day.
The increase in the rate leads to the departure of investors in US assets, which means the strengthening of the dollar and lower commodity prices.
A low discount rate leads to a depreciation of the dollar, a jump in commodity prices and a reorientation of investors to emerging markets.