the US Federal reserve took emergency measures to support the economy. The regulator said that “the outbreak of coronavirus caused damage and disrupted economic activity in many countries, including the United States,” and sharply reduced key interest rate: from a previous range of 1-1. 25% to 0-0. 25%. As already wrote “Conduct. Economy”, a move US President Donald trump, noting that it was “wonderful for our country.”
Faced with a critical situation in the financial markets, the fed also reduced its emergency lending rate at the discount window for banks, by 125 basis points to 0.25% and extended the period to 90 days.
Discount window “plays an important role in maintaining liquidity and stability of the banking system and the effective implementation of monetary policy … (and) supports a smooth flow of lending to households and businesses”, said in a separate message fed.
the Discount window is part of the functions of the fed as “lender of last resort” to the banking industry. Companies can use the window to meet their liquidity needs, although some are reluctant to do so because this may indicate that the organization is experiencing financial problems and openly tells about it. In addition, the fed also lowered reserve requirements for thousands of banks to zero.
the lower rates the fed is not limited, the regulator has decided to pour into the market “real money” by launching a new round of quantitative easing. Under QE, the regulator intends to acquire the assets for $700 billion, buying including government bonds and mortgage-backed securities.
Quantitative easing will be through the purchase of Treasury bonds by $500 billion and mortgage-backed securities funded agencies by $200 billion Program starts on March 16.
in addition, the us Central Bank said that as part of a coordinated package of measures at the global level The Bank of Canada, Bank of England, Bank of Japan, European Central Bank, the Federal reserve and the Swiss national Bank adopted measures to increase dollar liquidity around the world on the basis of existing agreements on currency exchange.
the fed added that “ready to use full range of tools to support the flow of lending to households and businesses and thereby to contribute to the goals of maximum employment and price stability”.
the reduction in the rate of the American Federal Reserve was the second in one month: on March 3 the regulator to urgently lowered the bar immediately by 50 basis points. Thus, the coronavirus has forced the U.S. Central Bank to do something that long and painfully sought from him is Donald trump, who demanded to reduce interest rates and thereby to ensure the country’s competitive advantage in trade wars.
Focusing on the US, the rate began to reduce and in other countries: in Hong Kong, in Norway. The ECB preferred quantitative easing: as wrote earlier “News. Economy,” the regulator announced a QE program of €120 billion, the Bank of Japan also decided to put out the fire with money, saying that will release cash bail bonds by 500 billion yen ($4.8 billion).
However, not all countries have the idea of trying to resolve the situation with lower rates are considered to be correct. In particular, the Central Bank of Sweden said that monetary policy easing will not help in the fight against the negative effects of coronavirus. The announcement came shortly before the first reduction in the fed rate. After that panic in the markets only intensified. March 12, the American indexes have updated 30-year lows. The experts noted that the worse the situation looked only in “Black Tuesday” 1987. Now in the exchange calendar will appear, and a “Black Thursday”.