On Sunday, the Federal Reserve announced it would slash interest rates by one percentage point down to 0%-0.25% as a rare emergency action against the financial instability caused by the COVID-19, or coronavirus, pandemic. This follows the previous March 3 decision to cut the rate by half a percentage point.
Aggressive monetary policy moves like this are intended to grease the gears of the borrowing and lending industries. According to Bankrate, the federal funds rate is “the interest rate at which banks and other depository institutions lend money to each other, usually on an overnight basis.” This baseline rate affects all other rates, from credit cards and savings accounts to mortgages and student loans, and has a cascading effect on the economy and the willingness of banks and businesses to borrow from one another.
The action won’t provide immediate relief to the global economy. Instead, it will be more helpful after this period of financial volatility passes… Read More