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The Fed’s Decision and What It May Mean for Investors

Wells Fargo Investment Institute – June 10, 2020

Policy Announcement

The Federal Open Market Committee (FOMC) decided to leave the federal funds rate unchanged at 0.00%–0.25%. The Federal Reserve (Fed) also announced that it will continue to purchase Treasury, agency mortgage-backed, and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning.

Download the Key Takeaways (PDF)

Stated Reasons

  • The novel coronavirus is causing tremendous human and economic hardship across the United States and around the world.
  • The virus and measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses.
  • Weak demand and significantly lower oil prices are holding down consumer price inflation.

Looking Forward

  • The Committee expects to maintain this target range (0.00%-0.25%) until the Committee is confident that the economy has weathered recent events and is on track to meet its maximum employment and price stability goals.
  • The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health—along with global developments and muted inflation pressures—and will use its tools and act as appropriate to support the economy.
  • Timing and sizing of future adjustments to monetary policy will be in consideration of the Fed’s symmetric 2% inflation objective.

What Else?

  • To support the flow of credit to households and businesses, the Committee will continue to purchase Treasury securities and agency and commercial mortgage-backed securities at least at the current pace to support smooth market functioning.
  • The Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor market conditions and is prepared to adjust as appropriate.
  • The release of economic projections suggests that FOMC members expect the federal funds rate to remain unchanged though 2022.