Fed Bazooka: Cuts Rates to Near Zero & More QE
16 March, 2020
WASHINGTON (EconoStream) - Sunday night, before the market open, the US Federal Reserve Board and FOMC announced another round of emergency steps including:
- Cutting the fed funds target range by 100bps to 0.00%-0.25%
- Additional QE of $500bn in US Treasuries and $200bn Agency MBS “over coming months”
- Changes to USD swap lines
- Cutting the discount rate by 150bps
- Intraday liquidity encouragement
- Bank capital and liquidity buffers
- Eliminated reserve requirements
- Forward guidance- “maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals”.
Here’s the statement: https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm
Credit extension actions statement https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm
Swap line actions https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315c.htm
This action means the regularly scheduled FOMC meeting this week will not occur.
The Fed, BoC, BoE, BoJ, ECB and SNB made a coordinated move to lower pricing on standing US dollar liquidity swap arrangements by 25 bps. The RBNZ cut rates by 75 bps to 0.25% and signalled that any additional stimulus was most likely to take the form of an asset purchases program. The HKMA cut the base rate to 0.86% following the Fed move.