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HomeNewsFed Slashes Rates to 0%, Begins QE to Combat Effects of COVID-19

Fed Slashes Rates to 0%, Begins QE to Combat Effects of COVID-19

In an emergency announcement made on Sunday afternoon, the United States Federal Reserve has declared that it will be cutting interest rates to zero for the first time since the 2008 financial crisis. The move effectively cuts interest rates by 100 basis points following the Fed’s sudden decision to cut rates by 50 basis points less than two weeks ago. However, the Fed is not considering negative interest rates.

The central bank will also begin quantitative easing by buying at least $700 billion in assets, with plans to make $500 billion in Treasury purchases and at least $200 billion in agency mortgage-backed securities purchases “over [the] coming months.” The purchases have no weekly or monthly cap.

“The desk is going to go out and buy at a strong rate that we think will restore market function, liquidity, as quickly as it can be restored. That language is open-ended,” said Federal Reserve Chairman Jerome Powell.

The move appears to have had little effect on the economic cliff dive that markets have been making over the past several weeks. Following the announcement on Sunday afternoon, CNN reported that US stock futures fell another 5%, eventually hitting the “limit down,” meaning that they cannot fall any further.


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