Fed Fund Rate
3rd August
Wendy Le
The Federal Reserve keeps federal funds rate steady at 0-0.25%, stating that economic growth is ‘well below’ levels prior to COVID-19. The rationale behind this decision is evident in the release of the advance U.S. GDP last thursday. In the advance GDP report, U.S. GDP plunged by 32.9% in the second-quarter. Although this was better than forecasted, it is still a historic level that is worse than those seen in the Great Depression and Global Financial Crisis. As GDP is the broadest measure of economic activity and a major indicator of economic strength, a huge plunge in GDP shows the effects of the pandemic which will weaken consumer confidence. There was also data released on the rising U.S. consumer spending for the second consecutive month, however, personal income drops further by 1.1%.