Federal Reserve Cuts Fed Funds Rate to Zero
The Federal Open Market Committee (FOMC), in a surprise meeting between regularly scheduled meetings, cut the fed funds rate to zero from its current target rate of 4.75-5.00.
Federal Reserve Chairman Jerome Powell made the announcement, saying, "Raising the fed funds rate so quickly over the past year caused the recent banking crisis. Rising mortgage interest rates have made housing unaffordable for many working families. The stock and bond markets were so much happier when interest rates were low.
"The FOMC has realized that consumer price inflation is caused by fiscal stimulus which puts additional money directly into consumer hands without increasing production. Raising interest rates is a slow and inefficient way to reduce inflation. Higher rates have only an indirect impact on consumer price inflation, while raising unemployment and harming the working class.
“As a result, the FOMC is abandoning monetary policy as a means of controlling inflation. The Federal Reserve will return to its original mission of being the lender of last resort during financial crises.”
The U.S. markets were closed during Mr. Powell’s announcement. Stock and bond market futures exploded upward in international trading.