Data Points
- The Federal Reserve maintained the federal funds target rate range at 0 to 0.25%
- The Consumer Confidence Index contracted at a record pace in April, falling to 86.9 from 118.8 in March
- Real U.S. GDP fell by a 4.8% annual rate in the first quarter
Top Three Market Headlines
Federal Reserve Keeps Rates Near Zero: After slashing the federal funds rate in March in response to the rapidly mounting economic and financial market pressures stemming from the COVID-19 crisis, the Federal Reserve last week voted to maintain the target federal funds rate at its current range of 0 to 0.25%. The Fed stated that it expects to maintain this target range until it “is confident that the economy has weathered recent events.” At the same time, the Fed reinforced its commitment to various other accommodative policies it enacted in the wake of the crisis, such as quantitative easing (i.e., purchasing bonds) and various lending programs, noting that the Fed “is committed to using its full range of tools to support the U.S. economy in this challenging time.”
Consumer Confidence Drops at Record Pace: Optimism among consumers deteriorated sharply in April as COVID-19 mitigation efforts slammed the U.S. economy and caused a surge in unemployment claims. The Conference Board, a private research group, stated last week that its index of consumer confidence contracted from 118.8 in March to 86.9 in April, the largest monthly contraction in the index’s history. Respondents noted that they were particularly pessimistic about current economic conditions; at the same time, however, consumers’ short-term outlook brightened modestly from March, perhaps reflective of certain states’ efforts to loosen stay-at-home restrictions.
U.S. GDP Contracts at Fastest Level Since 2008: The Bureau of Economic Analysis reported last week that real U.S. GDP decreased at an annual rate of 4.8% in Q1 2020, marking the worst quarter since 2008. Given the pervasive stay-at-home measures adopted across the country in March, personal consumption unsurprisingly led the decline, falling at a 7.6% annual rate. Reduced nonresidential fixed investment, exports, and inventories also contributed to the pullback. Forecasters expect an even worse contraction in the second quarter, though many economists predict a rebound in the second half of the year as states slowly reopen and lift shutdown measures.