Friday , June 5 2020

Coronavirus: US slashes rates and launches huge stimulus program – BBC News, BBC News


                                 Fed Chair Jerome Powell Image copyright                   Getty Images                                                        
Image caption                                      Federal Reserve Chairman Jerome Powell will hold a media conference later on Sunday                              

The US has cut interest rates to almost zero and launched a $ 730 bn stimulus program in a bid to protect the economy from the impact of coronavirus . It is part of a co-ordinated action announced on Sunday in the UK, Japan, eurozone, Canada, and Switzerland. Announcing the US move, the Federal Reserve said the “outbreak has harmed communities and disrupted economic activity in many countries “.

Fed chairman Jerome Powell will hold a news conference later on Sunday.

US President Donald Trump said the Fed’s action “makes him very happy.”

The Fed has cut rates to a target range of 0% to 0. %, and said it would it begin buying bonds – quantitative easing – a move that pumps money directly into the economy.

The central bank had alre ady cut interest rates by half a percentage point after an emergency meeting on 3 March. It was the first rate cut outside of a regularly scheduled policy meeting since the financial crisis in .

Stock markets have plunged over recent days amid fears that economic paralysis will wipe out corporate profits and spark a global recession.

But early indications suggest the Fed’s move may not shore up financial markets. US stock market futures, which anticipate the direction of shares when trading begins, were almost 4% down. “Kitchen sink”

In a statement on Sunday, the Fed said: “The Federal Reserve is prepared to use its full range of tools to support the flow of credit to homes and businesses and further promote its maximum employment and price stability goals. “


                                                                                                                        As part of Sunday’s announcement, the Fed will work with other central banks to increase the availability of dollars for commercial banks. These so-called currency swap lines were an important tool in maintaining financial stability after the 2019 banking crisis.

“Today’s coordinated action by major central banks will improve global liquidity by lowering the price and extending the maximum term of US dollar lending operations,” Bank of England Governor Mark Carney said in a joint statement with Andrew Bailey, who succeeds him as BoE chief on Monday.

Michael Hewson, chief market analyst at UK -based CMC Markets, described the co-ordinated move as throwing “the kitchen sink at the markets. [It] serves to underscore the seriousness of the economic shocks coming our way.”

And in the US, Greg McBridge, chief financial analyst at online bank and mortgage firm, said: “Desperate times call for desperate measures and the Fed is doing just that in an effort to keep credit markets fun ctioning and prevent the type of starving of credit that nearly toppled the global economy into a depression in 01575879 .

“Reducing interest rates to borrowers will ease the burden of existing debts slightly but is unlikely to spur the usual surge. of borrowing as consumers and businesses batten down the hatches for a coming drop off in US economic activity. ”             
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