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Fed seen making small changes to keep fed funds above zero

29 April 2020 05:46 (UTC +04:00)

The Federal Reserve is widely expected on Wednesday to lift the interest rates that influence its fed funds target, a technical move that could keep interbank lending running smoothly and help prevent financial market disruption should the benchmark rate fall below zero, APA reports quoting Reuters.

The effective fed funds rate dropped as low as 0.04% twice in the past week. That matched the level set in December 2011, two years after the economy emerged from the last recession, heightening concerns among some investors that it could go negative for the first time in the wake of the Fed’s aggressive moves to limit market damage from the coronavirus outbreak.

The fed funds rate declined despite the $1.35 trillion in Treasury bills brought to the market in the past four weeks, as low rates on repurchase agreements and depressed yields on Treasury bills resulted in more inflows into the fed funds market.