The Federal Reserve announced bold new measures to support the economy

How The Fed Is Trying To Prevent A Financial Crisis

The Fed will buy unlimited government bonds and mortgage-backed securities

The US Federal Reserve on Monday announced bold new measures to bolster the American economy amid the negative impact of the coronavirus pandemic.

The Fed said it would buy an unlimited amount of government debt and mortgage-backed securities to support credit markets. The Fed also introduced a series of lending programs designed to help both large and small businesses, while many U.S. companies are laying off thousands of employees amid declining demand for their products and services..

The new measures were announced ahead of the opening of another week of trading in the US financial markets, which suffered huge losses this month..

On Sunday night and Monday, US stock futures were down 2 percent or more. The Fed’s statement has not yet influenced this trend: the Dow Jones index lost almost 3 percent at the opening of trading..

“Strong efforts are needed in both the public and private sectors to limit job and income losses and ensure a quick recovery after the negative factors recede,” the Fed said..

“The Federal Reserve is using its full range of powers to vigorously support credit flows for American families and companies,” the agency said in a statement..

The Fed will buy government bonds and mortgage-backed securities “in quantities necessary to maintain the smooth functioning of the market.”.

This seems to indicate that the Fed is ready for even more aggressive measures than the recent cut in the key interest rate to almost zero and the purchase of new bonds worth $ 700 billion, which was announced last week..

In particular, a new lending program for small businesses was announced.

“Our country’s top priority is to take care of the victims and contain the spread of the virus,” the Fed said. “While uncertainty remains, it has become clear that our economy will face major disruptions.”.

Treasury Secretary Stephen Mnuchin on Monday announced the expansion of two newly created liquidity boosting mechanisms and the creation of three new mechanisms.

In particular, the decision was made to expand the support programs for money market investment funds MMLF and CPFF with the aim of supporting credit flows to municipalities and immediately increasing liquidity to help American consumers and companies affected by the coronavirus..

The Federal Reserve announced bold new measures to support the economy

In addition, three new mechanisms are being introduced. Under one of the programs, the Federal Reserve Bank of New York will provide loans to American companies that are backed by certain securities, secured by consumer and small business assets, such as student loans, car loans, credit cards, etc..

Under the second program, the Federal Reserve Bank of New York will provide liquidity to financial and non-financial companies by providing credit and bond financing to US companies with investment grade debt ratings..

Under the third program, the Federal Reserve Bank of New York will buy on the secondary market bonds issued by US companies with investment grade debt ratings..

Together, the three new programs will provide up to $ 300 billion in new funding. US Federal Treasury Using the Monetary Stabilization Fund to Provide $ 30 Billion in Capital.

“We will continue to take decisive measures to address liquidity problems,” said Mnuchin. “We are committed to supporting American workers and companies, especially SMEs and key industries, hardest hit by the coronavirus. We will take the necessary steps to support them and protect the US economy. “.

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The Federal Reserve announced bold new measures to support the economy

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