Global| Mar 16 2020FOMC Lowers Fed Funds Rate to Zero Citing Coronavirus
by:Tom Moeller
|in:Economy in Brief
Summary
The Federal Reserve lowered the target for the Fed Funds rate by 100 basis points to a range of 0.00% to 0.25%. In the Fed's press release, it stated "The coronavirus outbreak has harmed communities and disrupted economic activity in [...]
The Federal Reserve lowered the target for the Fed Funds rate by 100 basis points to a range of 0.00% to 0.25%.
In the Fed's press release, it stated "The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States."
Additionally, the Fed launched a $700 billion quantitative easing program designed to add further liquidity to the economy.
The full text of the FOMC statement can be found https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm
| Current | Last | 2019 | 2018 | 2017 | 2016 | |
|---|---|---|---|---|---|---|
| Federal Funds Rate Target | 0.0% - 0.25% | 1.00% -1.25% | 2.16% | 1.83% | 1.00% | 0.40 |
Empire State Manufacturing Conditions Index Collapses
by Tom
Moeller March 16, 2020
The Empire State Manufacturing Index of General Business Conditions fell to -21.5 during March from 12.9 in February. It was the weakest reading since March 2009. A level of 5.0 had been expected in the Action Economics Forecast Survey. A greatly lessened 20% of survey respondents reported improved business conditions while a surging 41.6% reported a decline.
The ISM-Adjusted Index, constructed by Haver Analytics, deteriorated to 49.5, the lowest level since last July. During the last 20 years, there has been 59% correlation between the level of the index and q/q change in real GDP.
Leading this month's weakness was a collapse in the new orders index to -9.3, the lowest reading in nine month. The shipments series also deteriorated 20.6 points to -1.7. The unfilled orders series weakened greatly and the delivery times fell, indicating quicker delivery speeds. The inventories index also declined.
Also working lower was the employment series to -1.5, its lowest level since July of last year. A lessened five percent of survey respondents reported increased hiring while an increased 19% reported a decline. During the last 20 years, there has been a 73% correlation between the index level and the m/m change in factory sector payrolls. The average workweek reading also turned negative.
The prices paid index eased to 24.5. Twenty-seven percent of respondents reported higher prices while two percent paid less. The prices received index displayed a greater degree of weakness as it fell to 10.1 from 16.7.
The Expected General Business Conditions index declined sharply to 1.2, down more than 20 points from February. Expected new orders, shipments and delivery times collapsed. The employment index fell to the lowest level in three years, and prices paid weakened sharply.
The Empire State figures are diffusion indexes, which are calculated by subtracting the percentage of respondents reporting declines from the percentage reporting gains. Their values range from -100 to +100. The data are available in Haver's SURVEYS database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's AS1REPNA database.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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