Fed takes major action to support markets as coronavirus weighs on economy
By: Megan Henney
The Federal Reserve on Monday took a slew of new actions designed to support the financial markets, including purchasing an unlimited amount of Treasurys and mortgage-backed securities.
The latest move by the U.S. central bank includes buying assets “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy."
The Fed also said it will purchase agency commercial mortgage-backed securities as part of an expansion of its asset purchases, known as "quantitative easing." The move represents an essentially open-ended commitment to the QE program.
This marks one of its most aggressive steps yet to insulate markets from the coronavirus pandemic.
“The coronavirus pandemic is causing tremendous hardship across the United States and around the world. Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus,” the Fed said in a statement.
“While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate," it added.
The Fed also said it would launch three new lending facilities, including the Term Asset-Backed Securities Lending Facility, a program first created during the 2008 financial crisis. There will be a $300 billion program to support the flow of credit to employers, consumers and businesses.
it unveiled plans for two other lending facilities to support corporate credit markets: The Primary Market Corporate Credit Facility for new bond and loan issuance and the Secondary Market Corporate Credit Facility to provide liquidity for outstanding corporate bonds.
Fed policymakers also said they expect to announce the "establishment of a 'Main Street business Lending Program' to support lending to eligible small businesses" in the near future.
The Fed is doing "whatever it takes," Gregory Daco, chief economist at Oxford Economics, tweeted.
U.S. equity futures pared their losses and turned higher on the news.