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Federal Reserve to make unlimited bond purchases in unprecedented move to support eco

“It has become clear that our economy will face severe disruption,” Fed leaders wrote in a statement. “The Federal Reserve is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time.”

U.S. markets jumped on the news with futures turning positive. The Dow Jones industrial average futures rose nearly 400 points as Wall Street embraced the historic actions.

Economists have dubbed this the “do whatever it takes” moment for the Fed. Some analysts on Twitter compared it to when talk show host Oprah gave everyone in the audience a car.

The Fed also announced Monday it will buy certain corporate bonds for the first time in its history and said it will “soon” announce a Main Street Business Lending Program. These programs are meant to provide ample availability of loans to small and large businesses on top of any efforts Congress does.

The central bank’s actions come as Congress has stalled on a major $1.8 trillion relief package for the nation, causing markets around the world to tank. St. Louis Fed President James Bullard predicted Sunday that unemployment could hit 30 percent in the second quarter, a higher level than during the Great Depression.

“Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate,” the Fed said.

Rhode Island’s state treasurer warned the state is likely to run out of money in “weeks,” the latest red flag of the economic carnage from the coronavirus. Economists say more than 2 million workers lost their jobs last week and many are now worried they will not be able to pay April rent.

Last week, the central bank slashed interest rates to zero and gave banks access to loans at a record-low 0.25 percent rate. The Fed also said it would do at least $700 billion in new bond purchases, but it is now indicating a willingness to do a lot more than that.

This week alone the Fed plans to purchase $375 billion worth of Treasury securities ($75 billion a day) and $250 billon worth of mortgage-backed securities ($50 billion a day).

“This is Jay Powell’s ‘whatever it takes’ moment,” said David Wessel, head of the Hutchins Center on Fiscal and Monetary Policy at Brookings, referring to Fed Chair Jerome Powell.

In addition to buying more bonds, as policy known as “quantitative easing,” or QE, the Fed is re-launching programs to support corporate and household debt. The Term Asset-Backed Securities Loan Facility helps the market for student loans, auto loans, credit card loans and loans backed by the Small Business Administration.

The Fed also said Monday that it will support the commercial lending market by purchasing commercial mortgage-backed securities in addition to mortgage-backed securities made up of home loans.

All of these efforts are meant to provide ample “bridge financing,” Fed officials said.

Source Website Federal Reserve to make unlimited bond purchases in unprecedented move to support eco

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