The US Federal Reserve stepped in on Sunday to prop up the US economy in the face of the escalating Covid-19 crisis.
In its most dramatic move since the 2008 financial crisis the Fed announced it is cutting its benchmark interest rate to near zero and said it would buy $700bn in Treasury and mortgage-backed securities as it attempts to head off a severe slowdown.
The outbreak has already led to large US companies including AT&T, Ford and General Motors sending workers home and has hit industries, especially the travel and leisure industry, particularly hard.
In a coordinated effort to see off a potential global economic crisis, the central bank also said it was working with the Bank of England, the European Central Bank and others to smooth out disruptions in overseas markets.
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed’s rate-setting committee said in a statement. “The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses.”
The highly unusual move comes as Fed chairman Jerome Powell has been facing intense criticism from Donald Trump over the president’s perception that he has moved too slowly to cut rates.
On Saturday Trump claimed he had the power to remove or demote Powell, the latest in a series of threats against the independent central bank’s leader.
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The Fed moves comes after one of the worst weeks for US stock markets in decades. All the major US markets are now in “bear” territory, meaning they have lost 20% or more from their recent highs.
At a press conference on Sunday, Trump congratulated the Fed on the move. “It makes me very happy,” he said.
Many economists are already predicting that the US will go into recession as a result of the outbreak, ending the longest streak of economic growth in US history.
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