The Federal Reserve Cuts Rates to Near Zero, Markets Fall

Written by Danny Abramov

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March 16, 2020

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The financial markets in freefall Monday morning after the Federal Reserve announced on Sunday that it slashing interest rates by a full percentage point to near zero and said it would buy $700 billion in Treasury securities. This is an aggressive step to protect the U.S. economy from the coronavirus pandemic.

Currently, the benchmark federal fund rate is at a range of 0 to 0.25 percent, down from a range of 1 to 1.25 percent. The cut essentially brings the nation’s interest rate to zero. President Trump has repeatedly pressured the Fed to something that President Trump has repeatedly pressed for over the past year.

“The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals. To support the smooth functioning of markets for Treasury securities and agency mortgage-backed securities that are central to the flow of credit to households and businesses, over coming months the Committee will increase its holdings of Treasury securities by at least $500 billion and its holdings of agency mortgage-backed securities by at least $200 billion,” the Federal Open Market Committee said in a statement.

Globally, stock exchange continued to fall and no optimism to be found, according to USA Today – Paris tumbled 9% shortly after the open, London sank 7% and Frankfurt gave up 7.5%. In Asian trading, Sydney’s benchmark plunged 9.7%, Hong Kong’s Hang Seng lost 3.4% and India shed 5.9%. 

In conclusion, investors do not think that the Fed’s actions are enough to steer us away from a recession, and that a massive fiscal stimulus is going to be required. 

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