Thu, Oct 01, 2020 @ 01:01 GMT

Trump pledges dramatic actions after DOW dropped -2013pts

    Wall street experienced massive selloff overnight, on double whammy of global coronavirus pandemic and oil price war. DOW declined -2013.76 pts or -7.79%, S&P lost -7.60%, NASDAQ dropped -7.29%. 10-year yield hit another record low at 0.398 before closing at 0.499, down -0.207. Fed fund futures are now pricing in 100% chance of -75bps rate cut to 0.25-0.50% at March 18 meeting.

    President Donald Trump said at the White House that he plans to announce “very dramatic” actions to support the economy on Tuesday. The measures will include payroll tax cut and “very substantial relief” for industries hit by the coronavirus outbreak.

    DOW’s steep fall from 29568.57 resumed earlier than we expected, by breaking 24681.01 temporary low. Further decline should be seen to 100% projection of 29568.57 to 24681.01 from 21702.34 at 22214.78 in the near term. The projection sits inside an important long term support range, with 55 month EMA at 22632.99, and 38.2% retracement of 6469.95 to 29568.57 at 20744.89. We’d expect strong support from there to end the current leg of selloff, and bring sustainable rebound.

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    Eurozone PMI manufacturing finalized at 47.5, lowest since 2013

      Eurozone PMI manufacturing was finalized at 47.5 in March, revised down from 47.6, down from February’s 49.3. It’s also the lowest level since April 2013, and the second straight months of sub-50 reading. Markit noted there was the biggest monthly decline in new orders since late 2012. Also, confidence hits lowest level in over six years.

      Among the countries, Germany PMI manufacturing was revised further lower to 44.1, an 80-month low. Italy PMI manufacturing was at 47.4, 70-month-low. France PMI manufacturing was revised down to 49.7, below 50, but it’s just a 3-month low. Australian PMI manufacturing was at 48-month low at 50.0. Netherlands PMI manufacturing was at 33-month low at 52.5. However, Greece PMI manufacturing was at 54.7, 12-month high.

      Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

      “The March PMI data indicate that the eurozone’s manufacturing sector is in its steepest downturn since the height of the region’s debt crisis in 2012. The survey is indicative of output falling at a quarterly rate of approximately 1% in March, suggesting that the January rebound from one-off factors late last year seen in the latest official data is likely to prove short lived.

      “Looking at the forward-looking indicators, downside risks have intensified, and the trend could clearly deteriorate further in the second quarter. New orders are falling at a rate not seen since 2012, and disappointing sales mean warehouses are filling with unsold stock. The orders-to-inventory ratio – a key indicator of the future production trend – is at its lowest for almost seven years. Expectations of output for the coming year are also the gloomiest since 2012.

      “Concerns over trade wars, tariffs, rising political uncertainty, Brexit and – perhaps most importantly – deteriorating forecasts for the economic environment both at home and in export markets, were widely reported to have dampened business activity and confidence.

      “Cost cutting has become more evident as firms grow more risk averse, notably with respect to hiring. Job losses were reported in both Germany and Italy, where the downturn in demand is doing the most damage. However, France’s manufacturing sector is also now back in decline, Austria’s goods-producing sector has stalled, Spain is close to stagnation and growth has lost considerable momentum in the Netherlands, highlighting the increasingly broad-based nature of the current deterioration.”

      Full release here.

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      China CFETS lowers Dollar weighting in RMB index, increase Euro weighting

        Starting on January 1, US Dollar’s weighting in the China Foreign Exchange Trade System (CFETS) RMB Index would be lowered. CFETS is overseen by the PBoC and the RMB index measures the value of Yuan against a basket of 24 major currencies, with weights based on international trade.

        After the adjustment, Dollar’s weighting will be lowed from 22.4% to 21.59%. Euro’s weighting will be increased from 16.34% to 17.40%. CFETS said the adjustment was to make the index more representative, taking into account trade data from 2018.

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        CBRT announced measures on Turkish Lira and FX liquidity management

          Full statement below.

          Press Release on Financial Markets

          To support financial stability and sustain the effective functioning of markets, the following measures have been introduced:

          I. Turkish lira liquidity management:

          1) In the framework of intraday and overnight standing facilities, the Central Bank will provide all the liquidity the banks need.

          2) Discount rates for collaterals against Turkish lira transactions will be revised based on type and maturity, thus providing banks with flexibility in their collateral management. Through this regulation, the discounted value of banks’ current unencumbered collaterals is projected to increase by approximately 3,8 billion Turkish liras.

          3) Collateral FX deposit limits for Turkish lira transactions of banks have been raised to 20 billion euros from 7,2 billion euros.

          4) As cited in the Monetary and Exchange Rate Policy Text for 2018, when deemed necessary, in addition to one-week repo auctions, which are the main funding instrument of the Central Bank, traditional repo auctions or deposit selling auctions may be held with maturities no longer than 91 days.

          5) For the days with relatively higher funding need, more than one repo auction may be conducted with maturities between 6 and 10 days.

          6) To provide flexibility in banks’ collateral management, upon the request of banks, a portion of or the entire amount of the winning bids in one-week repo auctions will be allowed to be used in deposit transactions instead of repo transactions at the Central Bank Interbank Money Market with the same interest rate and maturity.

          II. FX liquidity management:

          1) Banks will be able to borrow FX deposits in one-month maturity in addition to one-week maturity.

          2) The Central Bank will resume its intermediary function at the FX deposit market. Accordingly, through the intermediation of the Central Bank, banks will be able to borrow from and lend to each other at the FX deposit market as per the rules set by the Implementation Instructions on the Foreign Exchange and Banknotes Markets.

          3) Banks’ current foreign exchange deposit limits of around 50 billion US dollars may be increased and utilization conditions may be improved if deemed necessary.

          4) Banks will continue to purchase foreign banknotes from the Central Bank via foreign exchange transactions within their pre-determined limits at the Foreign Exchange and Banknotes Markets.

          The Central Bank will closely monitor the market depth and price formations, and take all necessary measures to maintain financial stability, if deemed necessary.

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          Gold breaks out of triangle, heading to 1862 support and below

            Gold breaks out of triangle pattern today and hits as low as 1890.17 so far. The development suggests that corrective pattern from 2075.18 is starting another falling leg for 1862.55 support first. Break there will target 61.8% retracement of 1670.66 to 2075.18 at 1825.16. At this point, we’d expect strong support around there to contain downside to complete the correction.

            However, it should be noted that the strong break of 55 day EMA could be a sign of larger correction. This is not our preferred scenario yet. But firm break of 1862.55 would argue that Gold is indeed correcting the whole rise from 1160.17. In that case, deeper fall would be seen back to 38.2% retracement of 1160.17 to 2075.18 at 1725.64 in the medium term, which would then be close to 55 week EMA (now at 1696.48).

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            John Williams takes over New York Fed, pledges openness and transparency

              Ex-San Francisco Fed President John Williams takes over the job of New York Fed President today. In a statement, he pledged openness and transparency, objectivity and independence of thought, and commitment to the diverse needs of familis and business across the District.

              Below is the full statement.

              Statement from President Williams

              I am pleased to be starting my tenure today as president and CEO of the Federal Reserve Bank of New York. As someone who has dedicated his career to public service, I can think of no better place from where to continue to support the nation’s economic well-being.

              The New York Fed plays a unique role in the Federal Reserve System, with responsibilities for implementing monetary policy, managing a critical payments system, overseeing a large number of complex financial institutions and managing international relationships. I take each of these responsibilities with the utmost seriousness and am committed to executing my role as president of the New York Fed and on the Federal Open Market Committee (FOMC) to the absolute best of my ability.

              So what can you, the public, expect of me?

              • Openness and transparency. I am dedicated to learning from a wide range of perspectives and experiences from across the District. Openness flows both ways, and we have a duty to explain the reasoning behind our actions. I am committed to acting in as transparent a manner as possible.
              • Objectivity and independence of thought. I will continue to make monetary policy recommendations based on what I believe is in the best interest of our economy. Throughout, I will strive to explain my reasoning, particularly when my views may differ from those of others.
              • Commitment to the diverse needs of families and businesses across our District. Understanding the varied financial and economic needs of families, businesses, and communities, and advocating for them at the policy table is a critical component of my role. I am equally committed to building a diverse and inclusive workforce and workplace at the New York Fed, which will help us better serve our communities.

              I start my first day with a deep commitment to securing the stability of our financial system and prosperity for our economy. I look forward to engaging with and learning from members of our communities and stakeholders throughout the District and beyond.

              John C. Williams became the 11th president and chief executive officer of the New York Fed on June 18, 2018.

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              OECD outlined two equally probable scenarios, single- and double- coronavirus hit

                OECD outlined two “equally probable scenarios” for the world economy in a report released today. In the “single-hit scenario”, second wave of coronavirus pandemic is avoided. Global economic activity would fall -6% in 2020, with unemployment rates jumping to 9.2%, up from 5.4% in 2019. “living standards fall less sharply than with a second wave but five years of income growth is lost across the economy by 2021”.

                In the “double-hit scenario”, a second wave of infections hits before year-end. A renewed outbreak of infections would trigger a return to lock-downs. World economic output would plummet -7.6% this year, before climbing back 2.8% in 2021. OECD unemployment rate would nearly double to 10% with little recovery in jobs by 2021.

                Full release here.

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                China production, retail sales, investment all missed expectations

                  The batch of October economic data released from China today is way below expectations. Industrial production growth slowed to 4.7% yoy, below expectation of 5.5% yoy. Fixed asset investment slowed to 5.2% ytd yoy, below expectation of 5.4%. That’s also the worst January-October growth since record began in 1996. Retail sales grew 7.2% yoy, missed expectation of 7.8% yoy, matching the more than 16 year low hit in April.

                  The chance of a recovery in growth momentum hinges on the results of the trade negotiations with US. Tariff rollbacks would be the key for the “easier” phase one deal. Without removing some of the imposed tariffs, in particular the September ones, the deal would be rather meaningless to the real Chinese economy. Of course, the biggest challenges come in the second phase of negotiations when core and fundamental issues, like subsidies to state-owned enterprises, would be addressed.

                  The Hong Kong HSI drops sharply today in response to the poor Chinese data. It’s also following the steep selloff this week as unrest in the city escalates abruptly. Current development affirms our view that corrective rebound from 24899.93 has completed with three waves up to 27894.56. Deeper fall should be seen back to retest 24899.93 low next.

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                  China raises FX RRR to 20% to stabilize Yuan from free fall, Dollar tumbles broadly. Is that manipulation?

                    Offshore Chinese Yuan staged a strong rebound, while Dollar tumbles across the board, after China’s Central bank announced measure to curb capital outflow and stabilize the falling Yuan exchange rate.

                    The People’s Bank of China said after market close that it raises the “foreign exchange risk reserve ratio of forward sales from 0% to 20%, effective August 6, 2018. According to the statement, it’s an act to “prevent macro financial risks, promote the stable operation of financial institutions, and strengthen macro-prudential management.”

                    In the next step, PBoC will “continue to strengthen the monitoring of the foreign exchange market,” and, “take effective measures to carry out countercyclical adjustments, maintain the smooth operation of the foreign exchange market, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.”

                    Full statement in simplified Chinese.

                    USD/CNH (offshore Yuan) tumbles sharply after hitting 6.912 earlier today, and it looks like it’s set to take on 6.8 handle soon.

                    Dollar tumbles across the board in the current 4H bar, just ahead of NFP. It’s also the weakest major currency for today now.

                    We’ve mentioned many times that the Chinese Government won’t allow free fall of the Yuan happens. If they’re going to do something, they will either halt its decline, or at best, slow the Yuan’s decline.

                    This is clear exchange rate manipulation to us. Where is Mnuchin? Where is Trump? Don’t move goal post, and stop your lies. Come out and tell China to stop the manipulation!

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                    US-China joint statement vowing not to launch a trade war

                      US and China issued a joint statement on Saturday to conclude the trade talks with Chinese Vice Premier Liu He on May 17 and 18. There was no mentioning of any number, but the statement said there were “consensus on taking effective measures to substantially reduce” US trade deficit in goods with China. And, China agreed to “significantly increase purchase” of US goods and services.

                      Additionally, there would be “meaningful increases” in US agriculture and energy exports to China, “expanding trade” in manufactured goods and services, encouraging “two-way investment” with “fair, level playing field for competition”. China also pledged to work on laws and regulations on intellectually property protections.

                      The Chinese State-owned Xinhua news agency described the statement as “vowing not to launch a trade war against each other”.

                      Here is a graphical summary by Xinhua.

                      Full statement below:

                      THE WHITE HOUSE – Office of the Press Secretary
                      FOR IMMEDIATE RELEASE – May 19, 2018

                      Joint Statement of the United States and China Regarding Trade Consultations

                      At the direction of President Donald J. Trump and President Xi Jinping, on May 17 and 18, 2018, the United States and China engaged in constructive consultations regarding trade in Washington, D.C. The United States delegation included Secretary of the Treasury Steven T. Mnuchin, Secretary of Commerce Wilbur L. Ross, and United States Trade Representative Robert E. Lighthizer. The Chinese delegation was led by State Council Vice Premier Liu He, Special Envoy of President Xi.

                      There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China. To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States.

                      Both sides agreed on meaningful increases in United States agriculture and energy exports. The United States will send a team to China to work out the details.

                      The delegations also discussed expanding trade in manufactured goods and services. There was consensus on the need to create favorable conditions to increase trade in these areas.

                      Both sides attach paramount importance to intellectual property protections, and agreed to strengthen cooperation. China will advance relevant amendments to its laws and regulations in this area, including the Patent Law.

                      Both sides agreed to encourage two-way investment and to strive to create a fair, level playing field for competition.

                      Both sides agreed to continue to engage at high levels on these issues and to seek to resolve their economic and trade concerns in a proactive manner.

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                      China released 36k-word white paper showing it’s not backing down on trade war with US

                        China’s State Council release a “White Paper on China-US Economic and Trade Frictions and China’s Position” today. This 36000 words paper consists of six sections, detailing the benefits of the bilateral trade, the economic and trade relations, US protectionism and trade hegemonism, the threat of US practice to world economy and China’s own position.

                        In particular, the paper condemns the under the “America First” bandwagon, the new US government “abandoned the basic norms of international exchanges such as mutual respect and equal consultation, and implemented unilateralism, protectionism and economic hegemonism.”And the US used different means to “carry out economic intimidation, and impose extreme pressure its own interests impose its own interests on China.” The paper also detailed the new protectionist measures of the US. These include measures that discriminate products of other countries, abused national security investigations, subsidies on local industries.

                        China’s own position include defending the “dignity and core interests of the country”, “promote healthy trade relationship with the US”, “promote and improve multilateral trade system”, “protect property and intellectual property rights”, “protect rights of foreign businesses in China”, “continue deepening reforms on opening the markets”, work on win-win relationships with developed and developing countries”, etc.

                        All-in-all, the main message is that China is not going to back down in the trade conflicts. That’s what we get. Below are the links to the details as reported by the official Xinhua (in simplified Chinese). Look like they’re pretty serious.

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                        Economics professor Giovanni Tria might replace Paolo Savona as Italian Economy Minister

                          It’s reported that  Italy’s anti-establishment 5-Star Movement and the far-right League party are close to finding that “point of compromise” in replacing Paolo Savona as economy minister in the government.

                          The name of economics professor Giovanni Tria flow around in the media. Meanwhile, law professor Giuseppe Conte will likely remain as prime minister. Decision could come as soon as on Friday. And if these names are accepted by President Sergio Mattarella, a snap election could be averted and a coalition government would finally be formed.

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                          Fed Evans: More fiscal relief needed to limit further damage to households and businesses

                            Chicago Fed President Charles Evans warned, “we are taking a very serious and unnecessary risk if we do not extend federal assistance to out-of-work households.” He added, “the potential hole in aggregate demand may be large, and in my view more fiscal relief is needed in order to limit further damage to households and businesses, especially those in vulnerable communities.”

                            “The longer the dual challenges of the pandemic and recession continue, the greater is the risk of deepening the already stark inequities in our economy,” he added.

                            New York Fed President John Williams said, “Structural inequality stifles growth, but there is no single silver bullet that can solve the problems laid bare by the pandemic”. “There is so much work that needs to be done to make sure that we are fostering an equitable recovery and ensuring that everyone is able to fulfill their economic potential,” he said.

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                            Trump got full support from Democrat Schumer on trade war escalation, but others unsure.

                              Trump’s move to escalate trade war with China got full support from Democrat Senate leader Chuck Schumer. Schumer urged Trump to “hang tough on China” in a tweet” and “don’t back down”. He added “strength is the only way to win with China”.

                              White House economic adviser Larry Kudlow tried to tone down the threat and said trump is merely “issuing a warning here”. He told Fox News that ” we bent over backwards earlier, we suspended the 25 percent tariff to 10 and then we’ve left it there. That may not be forever if the talks don’t work out”

                              However, an informal trade adviser to Trump, Michael Pillsbury, clearly disagreed with Kudlow. He said “I take the president’s tweet at face value. I was disappointed that Larry Kudlow downgraded it to a mere warning, which may tend to undermine American credibility as the Chinese delegation prepares its position”.

                              It’s unsure for now whether Trump is really intending to drop the negotiations abruptly. Or, he’s just trying to push China for last minute concessions on some key issues. But the act could firstly undermine credibility of the US in negotiations with other countries. And, it could also undermine Trump’s own credibility as he’s told the public numerous times that a deal was close.

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                              China announces additional tariffs on 5207 US imports, valued at USD 60B, rates from 5% to 25%

                                More from China, the Finance Ministry announced the counter measures to US threat of imposing 25% products on USD 200B in Chinese goods. The State Council’s Customs Tariff Commission decided to impost additional levies on 5207 US products, totalling around USD 60B in value.

                                Additional 25% tariff will be imposed on 2493 products, additional 20% on 1078 products, additional 10% on 974 products and additional 5% on 662 products. The effect date is to be determined.

                                Here is the official statement in simplified Chinese.

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                                USTR announced 10% tarrifs on Chinese imports, to increase to 25% on Jan 1 2019

                                  US Trade Representative finally announced the tariffs on USD 200B of Chinese imports, effective September 24, 2018. The initial tariff rate is 10%. Staring January 1, 2019, the tariff rate will be increased to 25%. The list of products covers 5745 lines of the original 6031 lines proposed back in July 10. 297 lines were fully or partially removed from the list. Products include consumer electronics, certain chemical inputs for manufactured goods, textiles and agriculture; certain health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens.

                                  The tariffs were part of the follow-up actions on Section 301 investigations. China’s unfair trade practices were repeated in the statement. These include, forced technology transfer, depriving UA companies to set market based terms in negotiations, unfairly facilitating systematic investment in acquisition of US technology companies, and cyber intrusions to US commercial computer networks for valuable business information.

                                  Trump warned in a statement that new round of tariffs on around USD 267B of additional imports will be pursued if China retaliates. He added that “we have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly.” “But, so far, China has been unwilling to change its practices.”

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                                  New Zealand BusinessNZ PMI dropped to 52.8 and production dipped again

                                    New Zealand BusinessNZ Performance of Manufacturing Index dropped to 52.8 in June, down from 54.4. BusinessNZ’s executive director for manufacturing Catherine Beard said that the slow-down in expansion was mainly due to ongoing drops in a key sub-index.

                                    “Production (51.8) experienced another decrease in expansion levels for June, which meant it was down to its lowest point since January 2017. On a positive note, the other key sub-index of New Orders (57.1) remained in healthy territory, which at least should feed through to production levels in the coming months.

                                    In addition, the proportion of positive comments in June (51.7%) decreased from May (55.1%), and very similar to February (51.4%). Those who provided negative comments typically noted a general downturn and uncertainty in the market”.

                                    BNZ Senior Economist, Craig Ebert said that “broadly speaking, the PMI has settled down into a trend-like pace this year, averaging 53.8 (excluding April’s spike). This is after outperformance through most of 2017, when it averaged 56.2”.

                                    Full BusinessNZ Performance of Manufacturing Index release.

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                                    Fed Harker: Risks tilt very slightly to the downside, at most one hike this year

                                      Philadelphia Fed President Patrick Harker said in a speech in London that “potential risks tilt very slightly to the downside” in the US. Though he emphasized the work “slight” as he saw “outlook as positive” and economy “continues to grow” and is on pace to the the longest economic expansion in history.

                                      Harker added there was “continued strength” in the labor market. He’d “cautious against” getting caught up in a single data point in February’s dismal job data. Meanwhile, inflation is running around 2% target and “does not appear to be on a strong upward trajectory”. Rather inflation is “edging slightly downward”.

                                      Combining all, Harker stays in “wait-and-see mode”. He expects “at most, on rate hike this year, and one in 2020”. But his stance will be “guided by data”.

                                      Harker’s full speech here.

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                                      Into US session: Oversold Euro recovers broadly, markets won’t forget there are US trade tensions

                                        Euro is making a strong come back today as market digest recent sharp losses. EUR/USD breached 1.1639 minor resistance while EUR/JPY break 126.43. Both developments suggest temporary bottoming. Though, they’re far from reversing recent down trend. And, at the time of writing, German (0.369) and Italy (2.864) yield spread are still close to 250, which suggests much nervousness in the markets.

                                        Though, the news that 5-Star Movement is trying to find a point of compromise for economy minister is supporting sentiments. At least, they’re working on forming a government again. And while being highly critical, 5-Star has never committed themselves to leaving Euro. The news that anti-euro League is not interested, but is pushing for election again is also sentiment supportive. Additionally, Eurozone data released today are not bad.

                                        Yen and Dollar, on the other hand, are trading broadly lower. Yen weaken on rebound in German, UK and US yields. Meanwhile, Dollar is weak as markets won’t forget that the US is in trade tension with many other countries/regions, even its own allies. NAFTA talk is going nowhere and there is no positive news regarding trade talk with EU. The steel tariff temporary exemption is going to expire on Friday and retaliations from Canada, Mexico and the EU are waiting on the line. Trump also made an about turn and issued a strong statement regarding China yesterday, indicating very little intention to carry on with negotiation.

                                        For the week, Euro remains the weakest one, followed by Sterling. New Zealand Dollar and Japanese Yen are the strongest ones.

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                                        Fed kept interest rate at 0-0.25%, maintain asset purchast at least at current pace

                                          Fed left federal funds rate target rate unchanged at 0.00-0.25% as widely expected, by unanimous vote. FOMC also pledged to maintain the target range “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” Additionally, Fed will “increase its holdings of treasury and MBS “at least at the current pace”.

                                          In the accompanying statement, FOMC said that the coronavirus and containment measures “have induced sharp declines in economic activity and a surge in job losses”. Weaker demand and significantly lower oil prices are “holding down consumer price inflation”. Though, financial conditions “have improved” due to policy measures.

                                          Fed also said it will “continue to monitor implications of incoming information” and pledged to “use its tools and act as appropriate to support the economy”. The range of information watched include “measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”

                                          Full statement below.

                                          Federal Reserve Issues FOMC Statement

                                          The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

                                          The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

                                          The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

                                          The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

                                          To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.

                                          Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.

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