Fed delivered another emergency rate cut late Sunday, by -1.00% to 0-0.25%. Federal funds rate are now back at the record low it hit during the 2008 global financial crisis. Additionally, Fed will restart asset purchases to boost its holdings by at least USD 700B, with USD 500B of treasury securities and USD 200B of agency mortgage-backed securities. Loretta Mester dissented, preferring a smaller rate cut instead.
Additionally, there are other measures announced too. Banks are allowed to borrow from the discount window for a long as 90%. Reserve requirement ratios were also lowered to 0%. Fed will also coordinate with other major central banks to ensure Dollar availability through liquidity swap line arrangements.
In the statement, Fed said that the coronavirus outbreak has “harmed communities and disrupted economic activity in many countries” including the US. The effects will “weigh on economic activity in the near term and pose risks to the economic outlook.” Fed will keep interest rate at the current 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.”
