Published: Wed, March 25, 2020
Markets | By Otis Pena

The Fed continues to struggle to keep the economy afloat

The Fed continues to struggle to keep the economy afloat

Here, Fed Chairman Jerome Powell is seen as the Federal Reserve cut interest rates earlier this month - one of several emergency moves created to protect the world's largest economy.

Existing purchases of U.S. Treasury and mortgage-backed securities will be expanded as much as needed "to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy".

The central bank pledged to "will continue to use it full range of tools to support the flow of credit to households and businesses".

"It's their bazooka moment", said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan.

With customers disappearing rapidly, businesses starved of cash may be able to tap into the Fed's "lifeline" to stay afloat while the shutdowns continue, said University of OR economics professor Tim Duy.

"The Board recognizes that the current situation is significantly affecting areas of the country in different ways and will work with financial institutions to understand the specific issues they are facing", the Fed said in a separate statement.

NY governor warns COVID-19 infections 'spiking'
Cuomo said people's blood will be tested to see if they have developed antibodies to COVID-19. "Let's help each other". Trump later hit back at Cuomo for "complaining". "If we don't have the ventilators in 14 days, it does no good".

Still, he said, without massive fiscal aid such efforts won't be enough.

The U.S. economy is now suffering from three material economic shocks, as global trade disruptions, mandated domestic business closures, and disruptions in lending from severe financial market stress will contribute to a large contraction in U.S. economic activity in 2Q.

The open-ended plans escalate an earlier emergency move that called for the Federal Open Market Committee to buy at least $500 billion in Treasury securities and at least $200 billion in mortgage-backed securities.

Its supervisory adjustments mark the latest move by USA bank regulators to reassure banks that the Fed wants them to continue lending through the economic downturn, and that it will not pursue them for regulatory foot-fault.

Hundreds of thousands of people have already filed for unemployment insurance in California alone, the state's governor said at the weekend, and many analysts are projecting declines in economic output next quarter that are far worse than the steepest drop during the Great Recession.

The euro was last up 0.98% against the greenback at US$1.0799.

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