In response to the global economic effects of the new coronavirus and in an effort to boost economic activity, the U.S. Federal Reserve (Fed) cut the federal funds rate by half a percentage point, bringing it to a range of 1% to 1.25%. This swift decision — marking the biggest rate drop since 2008 — was made to buoy consumer confidence and spending and to offset the “evolving risks to economic activity” posed by the coronavirus, the Fed said in a statement. Visit the Federal Open Market Committee’s website to read the full statement.
The fed funds rate is the benchmark rate used by financial institutions to determine borrowing costs. Mortgage rates are already at historic lows, and while a fed rate cut does not directly dictate mortgage rates, this move may drive rates even lower — making it more affordable to borrow.