Breaking stock market news
It is Sunday, March 15, 2020 and the stock market is closed. However, The Federal Reserve made today an emergency announcement:
- Fed slashes rates to zero
- Restarts QE program
“The Federal Reserve made an emergency announcement Sunday afternoon by announcing that it would be cutting interest rates to zero for the first time since the financial crisis.
The central bank said it will use its “full range of tools” to battle the economic impacts of the novel coronavirus and announced quantitative easing in the form of at least $700 billion of asset purchases. It also encouraged banks to provide credit to the economy by eliminating reserve requirements and allowing the financial firms to tap into capital and liquidity buffers.
In a global effort, the Fed also announced standing U.S. dollar liquidity swap line arrangements in coordination with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank.
“The Federal Reserve 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,” the Fed said in a statement.”
The Fed decision can move significantly the US stock market and the US dollar this week
A bold move indeed, not only related to its timing, a few days before the scheduled FOMC decision, but also because of its magnitude. With zero interest rates, the tools for monetary policy are now very restricted. Zero interest rates are positive for stocks, and for businesses, with lower cost of money. Fed decided also to east bank lending rules, in addition to injecting a few days ago a large amount of liquidity into the market.