Mar 12, 2020 - Economy & Business

Market expects Fed to cut U.S. interest rates to 0% this month

Data: CME Group; Chart: Axios Visuals

Following President Trump's address Wednesday night, the market only moved further in its expectations that the Fed would dramatically cut rates, pricing in as much as a 95% likelihood that the central bank would move toward a reduction of 100 basis points to 0%-0.25% at its next meeting.

The big picture: It would be the Fed's largest rate cut since December 2008 when it last cut rates to zero, warning that "labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined."

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After its emergency rate cut, investors wonder what the Fed knows

Jerome Powell. Photo: Mark Makela/Getty Images

Investors and President Trump want the same thing after Tuesday's surprise 50 basis point cut by the Fed: more cuts.

The state of play: The announcement, two weeks to the day before the beginning of the central bank's scheduled March 17–18 policy meeting, has investors scratching their heads. "The Fed pulled the fire alarm without telling anybody why," Bernard Baumohl, chief global economist at the Economic Outlook Group, tells Axios.

Goldman Sachs expects a full percentage point of rate cuts from the Fed

Fed Chairman Jerome Powell. Photo: Sarah Silbiger/Getty Images

Fed chair Jerome Powell's statement on Friday afternoon that the U.S. central bank was "closely monitoring developments" and would "act as appropriate to support the economy" has eliminated any doubt that the Fed will cut U.S. interest rates at its meeting on March 17–18.

What we're hearing: "A Fed cut in March appears nearly certain," analysts at Goldman Sachs said in a late Sunday note to clients.

Fed cuts interest rates to near zero in emergency coronavirus intervention

Photo: Mark Makela/Getty Images

The Federal Reserve on Sunday cut its benchmark interest rate to almost zero and launched a $700 billion quantitative easing program in response to the expected economic downturn and stock market slump caused by the coronavirus.

Why it matters: This is the most drastic measure the Fed could take to try to shield the economy amid a global pandemic. The central bank hasn’t made moves this dramatic since the financial crisis.

Go deeperArrowUpdated Mar 15, 2020 - Economy & Business