MNI TEXT: FOMC Lowers Rates to 0%-0.25%; To Buy Tsys, MBS

     WASHINGTON (MNI) - The FOMC released the following statement at 5 p.m. ET

Sunday. 

     The coronavirus outbreak has harmed communities and disrupted economic

activity in many countries, including the United States. Global financial

conditions have also been significantly affected. Available economic data show

that the U.S. economy came into this challenging period on a strong footing.

Information received since the Federal Open Market Committee met in January

indicates that the labor market remained strong through February and economic

activity rose at a moderate rate. Job gains have been solid, on average, in

recent months, and the unemployment rate has remained low. Although household

spending rose at a moderate pace, business fixed investment and exports remained

weak. More recently, the energy sector has come under stress. On a 12-month

basis, overall inflation and inflation for items other than food and energy are

running below 2 percent. Market-based measures of inflation compensation have

declined; survey-based measures of longer-term inflation expectations are little

changed.

     Consistent with its statutory mandate, the Committee seeks to foster

maximum employment and price stability. The effects of the coronavirus will

weigh on economic activity in the near term and pose risks to the economic

outlook. In light of these developments, the Committee decided to lower the

target range for the federal funds rate to 0 to 1/4 percent. The Committee

expects to maintain this target range until it is confident that the economy has

weathered recent events and is on track to achieve its maximum employment and

price stability goals. This action will help support economic activity, strong

labor market conditions, and inflation returning to the Committee's symmetric 2

percent objective.

     The Committee will continue to monitor the implications of incoming

information for the economic outlook, including information related to public

health, as well as global developments and muted inflation pressures, and will

use its tools and act as appropriate to support the economy. In determining the

timing and size of future adjustments to the stance of monetary policy, the

Committee will assess realized and expected economic conditions relative to its

maximum employment objective and its symmetric 2 percent inflation objective.

This assessment will take into account a wide range of information, including

measures of labor market conditions, indicators of inflation pressures and

inflation expectations, and readings on financial and international

developments.

     The Federal Reserve is prepared to use its full range of tools to support

the flow of credit to households and businesses and thereby promote its maximum

employment and price stability goals. To support the smooth functioning of

markets for Treasury securities and agency mortgage-backed securities that are

central to the flow of credit to households and businesses, over coming months

the Committee will increase its holdings of Treasury securities by at least $500

billion and its holdings of agency mortgage-backed securities by at least $200

billion. The Committee will also reinvest all principal payments from the

Federal Reserve's holdings of agency debt and agency mortgage-backed securities

in agency mortgage-backed securities. In addition, the Open Market Desk has

recently expanded its overnight and term repurchase agreement operations. The

Committee will continue to closely monitor market conditions and is

prepared to adjust its plans as appropriate.

     Voting for the monetary policy action were Jerome H. Powell, Chair; John C.

Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida;

Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Randal K. Quarles. Voting

against this action was Loretta J. Mester, who was fully supportive of all of

the actions taken to promote the smooth functioning of markets and the flow of

credit to households and businesses but preferred to reduce the target range for

the federal funds rate to 1/2 to 3/4 percent at this meeting.

     In a related set of actions to support the credit needs of households and

businesses, the Federal Reserve announced measures related to the discount

window, intraday credit, bank capital and liquidity buffers, reserve

requirements, and -- in coordination with other central banks -- the U.S. dollar

liquidity swap line arrangements. More information can be found on the Federal

Reserve Board's website. 

     Decisions Regarding Monetary Policy Implementation

     The Federal Reserve has made the following decisions to implement the

monetary policy stance announced by the Federal Open Market Committee in its

statement on March 15, 2020:

     -The Board of Governors of the Federal Reserve System voted unanimously to

set the interest rate paid on required and excess reserve balances at 0.10

percent, effective March 16, 2020.

     -As part of its policy decision, the Federal Open Market Committee voted to

authorize and direct the Open Market Desk at the Federal Reserve Bank of New

York, until instructed otherwise, to execute transactions in the System Open

Market Account in accordance with the following domestic policy directive:

"Effective March 16, 2020, the Federal Open Market Committee directs the Desk to

undertake open market operations as necessary to maintain the federal funds rate

in a target range of 0 to 1/4 percent. The Committee directs the Desk to

increase over coming months the System Open Market Account holdings of Treasury

securities and agency mortgage-backed securities (MBS) by at least $500 billion

and by at least $200 billion,

respectively. The Committee instructs the Desk to conduct these purchases at a

pace appropriate to support the smooth functioning of markets for Treasury

securities and agency MBS.

     The Committee also directs the Desk to continue conducting term and

overnight repurchase agreement operations to ensure that the supply of reserves

remains ample and to support the smooth functioning of short-term U.S. dollar

funding markets. In addition, the Committee directs the Desk to conduct

overnight reverse repurchase operations (and reverse repurchase operations with

maturities of more than one day when necessary to

accommodate weekend, holiday, or similar trading conventions) at an offering

rate of 0.00 percent, in amounts limited only by the value of Treasury

securities held outright in the System Open Market Account that are available

for such operations and by a percounterparty limit of $30 billion per day.

     The Committee directs the Desk to continue rolling over at auction all

principal payments from the Federal Reserve's holdings of Treasury securities

and to reinvest all principal payments from the Federal Reserve's holdings of

agency debt and agency mortgage backed securities received during each calendar

month in agency mortgage-backed securities. Small deviations from these amounts

for operational reasons are acceptable.

     The Committee also directs the Desk to engage in dollar roll and coupon

swap

transactions as necessary to facilitate settlement of the Federal Reserve's

agency mortgage-backed securities transactions.

     -In a related action, the Board of Governors of the Federal Reserve System

voted unanimously to approve a 1-1/2 percentage point decrease in the primary

credit rate to 0.25 percent, effective March 16, 2020. In taking this action,

the Board approved requests to establish that rate submitted by the Boards of

Directors of the Federal Reserve Banks of Minneapolis and New York.

     This information will be updated as appropriate to reflect decisions of the

Federal Open Market Committee or the Board of Governors regarding details of the

Federal Reserve's operational tools and approach used to implement monetary

policy.

     More information regarding open market operations and reinvestments may be

found on the Federal Reserve Bank of New York's website.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

[TOPICS: MMUFE$,M$U$$$]