Chart of the Week: Fed goes to zero as virus risks materialise

In response to the COVID-19 pandemic, the Federal Reserve cut its benchmark interest rate by 100 basis points on Sunday. For the first time in history, all G7 central banks are now lending at rates below 1%. As countries in Europe and cities in the US go into lockdown, the pandemic is expected to result in an acute disruption to economic activity. Looser monetary policy will not address the fall in consumption, but will help banks lend to businesses that need short-term funding to get through a period of lower demand. The speed of recovery in the medium term will depend almost entirely on the effectiveness of government measures to stop the spread of the virus.