BREAKING NEWS: The Fed acts to shore up economy

Rate cuts, QE, other actions are similar to 2008; stock futures drop, triggering trading halt

Reacting to the coronavirus emergency, the Federal Reserve announced Sunday it’s cutting interest rates to zero, launching a $700 billion QE (quantitative easing) program, and cutting commercial banks’ reserve requirements to zero. These actions are similar to what the Fed did in response to the 2008 financial crisis. CNBC described them as “the largest single day set of moves the [Fed] had ever taken,” by combining several policy actions all at once. The Fed also said it’s coordinating with other central banks around the world to provide liquidity to banks and financial markets.

In a followup press conference, Fed chief Jerome Powell said the moves were designed in part to encourage banks to lend to consumers. But the actions also appear to be aimed at protecting large commercial banks, whose stocks sold off sharply last week, who hold billions of dollars worth of loans to shale oil companies which are now in jeopardy because of the plunge in oil prices set off by a feud between Russia and Saudi Arabia over oil production quotas.

President Trump had been pressuring Fed chief Jerome Powell for deeper rate cuts, and Wall Street hoped the Fed would cut rates by a full 1% at its scheduled policy meeting on Wednesday, March 18, 2020. The Fed’s governing board, by moving up that meeting to Sunday, didn’t wait for markets to open Monday.

It did little to calm investors. On Sunday, after the announcement, Dow futures immediately plunged 5% (-1041 points), triggering a trading halt. This points to a rocky opening for stock markets on Monday morning.

Read story here.

Photo: Jerome Powell

2 Comments Add Yours ↓

  1. Mark Adams #

    Next act could be open warfare between Iran and Saudi Arabia. With no new temple being built in Jerusalem signaling the end times does this debunk the apocalypse? How will the markets react?

  2. Roger Rabbit #

    What’s that got to do with this article?

Your Comment