Skip to Content
Stock Analyst Update

Fed Focusing on Policy Tools to Support Economy

We don't think the Fed will be in any rush to raise rates, but so far its massive interventions appear to be working.

With everything else the Federal Reserve is up to, rate decisions from the Federal Open Market Committee seem like a sideshow. Nevertheless, the Fed issued its latest FOMC statement and, unsurprisingly, held the federal-funds rate at a range of 0% to 0.25%. The vote was unanimous. The Fed emphasized that it will maintain its current rate “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” The Fed also emphasized that it will continue to purchase as many Treasuries and agency MBS and CMBS as necessary to support the market, and that the Fed remains committed to its “full range of tools to support the U.S. economy.”

In other words, we don’t think the Fed will be in any rush to raise rates, even when the economy initially starts to recover. We think a robust recovery will have to be well underway before the next rate hike occurs. The Fed also still has a lot of room to support the economy with its other tools. Most recently, the Fed made modifications to its municipal liquidity facility, announced the creation of its main street lending program, and expanded its corporate credit facilities. At this point, with the importance of rates as a monetary policy tool fading into the background, we think the main focus will be on using these other tools to their full potential. We also don’t expect a series of new tools to be created at this point, as the current set appears to be fairly robust, and we expect the Fed to wait for more data before deciding if the current tool set isn’t enough. So far, the Fed’s massive interventions appear to be largely working, with spreads and liquidity in major asset types largely stabilizing after the initial spikes in instability when the crisis was beginning. We’ll have to wait and see if the lending interventions have their intended effect and allow consumers and businesses to “bridge the gap” between now and when the economy can reopen again.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.