Fed slashes interest rates to zero

The Federal Reserve announced another emergency rate cut to between 0 and 0.25% and said it will launch a $700-billion quantitative easing program.

Lewis Krauskopf reported the news for Reuters:

A massive rollout of easing measures by the Federal Reserve served to deepen some investors’ anxiety over how effectively policymakers will be able to mitigate the economic damage from a spreading coronavirus pandemic.

To many, the Fed’s dramatic actions brought home the severity of the situation the U.S. finds itself in as it is confronted by an accelerating epidemic that threatens to tip the world’s biggest economy into recession.

Others said that with financial markets in turmoil and the economy slowing, the virus’ broadening impact on activity cannot be solved by monetary policy alone.

“This is an indication that the central bank is very scared about the environment we’re in,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut. “The policy response is so strong, it’s likely to spook investors.”

CNBC’s Steve Liesman wrote:

The Federal Reserve, saying “the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” cut interest rates to essentially zero on Sunday and launched a massive $700 billion quantitative easing program to shelter the economy from the effects of the virus.

The new fed funds rate, used as a benchmark both for short-term lending for financial institutions and as a peg to many consumer rates, will now be targeted at 0% to 0.25% down from a previous target range of 1% to 1.25%.

Facing highly disrupted financial markets, the Fed also slashed the rate of emergency lending at the discount window for banks by 125 basis points to 0.25%, and lengthened the term of loans to 90 days.

Rob McLean, Laura He, and Julia Horowitz reported for CNN:

Global stock markets plunged Monday as investors were unnerved by drastic action from the US Federal Reserve to cushion the blow from coronavirus and as data showed the outbreak has caused an unprecedented economic collapse in China.

Markets were battered across Asia, with Australia’s benchmark index crashing nearly 10% in its worst day on record. In Europe, London’s FTSE 100 (UKX) fell 7% in early trading, while France’s CAC 40 (CAC40) and Germany’s DAX (DAX) dropped roughly 9%.

US markets were poised to suffer heavy losses. Dow (INDU) futures were last down 1,041 points, or about 4.5%. S&P 500 (SPX) futures slumped 4.8%, while Nasdaq (COMP) futures shed 4.5%. There are now more than 3,000 cases of the novel coronavirus in the United States, according to government agencies and the CDC.

Investors bailed out of stocks despite a massive intervention by the US Federal Reserve on Sunday. The central bank slashed rates to close to zero at an emergency meeting, and said it would purchase another $700 billion worth of Treasury bonds and mortgage-backed securities.