The Federal Reserve is stepping in to help the coronavirus-stricken economy, making an emergency announcement today that it will cut interest reates to near-zero and inject $700 billion into a quantitative easing program. The actions are the largest single day set of moves the bank had ever taken.
Stock futures plunged, however, presaging a nasty day for the market Monday. Futures currently imply the Dow opening down 1,200 points. The Fed was expected to act at its regular meeting this Tuesday and Wednesday and its extraordinary action on Sunday may have panicked investors.
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed said in a statement explaining the move. The Fed also slashed the rate of emergency lending at the discount window for banks by 125 bps to 0.25%, and lengthened the term of loans to 90 days.
Fed Chairman Jerome Powell is expected to hold a press conference via telephone at 6 p.m. ET. The actions by the Fed appeared to be the largest single day set of moves the bank had ever taken, mirroring in many ways its efforts during the financial crisis that were rolled out over several months. Sunday’s move includes multiple programs, rate cuts and QE, but all in a single day.
The Fed said in a statement that it “is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.”
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