Investing.com | Apr 29, 2020 14:03
By Yasin Ebrahim
Investing.com – The Federal Reserve held rates steady on Wednesday as expected, but signaled it would stick with ultra-loose monetary policy measures amid expectations for a sharp coronavirus-led contraction in economic growth.
The Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25%.
The unchanged decision comes as the central bank, in two unscheduled meetings on March 3 and March 15, cut its benchmark rate by 50 basis points and 100 basis points respectively, to a range of 0% to 0.25%.
It was the first time on record that the central bank had cut rates on two separate occasions between scheduled meetings.
The central bank also resumed its financial crises era quantitative easing program, pledging to purchase $700 billion in Treasury and mortgage-backed securities to avert a financial crisis.
"We have responded very strongly not just with interest rates but also with liquidity measures today," Fed Chairman Jerome Powell said during a press conference on March 15.
But fears of a liquidity squeeze persisted, forcing the Fed into bigger and bolder action across markets, including short-term lending markets, currencies and corporate credit.
Over a three-day period from March 15, the Fed pumped $1.5 trillion into repo, or repurchase agreement, markets to ease cost of short-term borrowing, put $1.1 trillion into the commercial-paper market to calm credit worries, doled out $4 trillion in emergency aid to mutual funds and agreed with other central banks to create foreign-exchange swap lines to remedy dollar fund shortages.
In the days that followed, the Federal Reserve continue to fire its bazooka, backstopping corporate credit markets and businesses.
In what was perhaps its boldest move, the U.S. central bank said it would buy unlimited amounts of Treasuries and mortgage-backed securities – a move that many said indicates the Fed will do whatever it takes to support the economy.
"The Federal Reserve is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time," Fed leaders wrote in a statement following the announcement.
Most recently, the Federal Reserve has joined forces with the government to help backstop the small business lending program, which was recently topped up by $320 billion as part of the latest stimulus bill.
The Fed's balance sheet has expanded to about $6.6 trillion so far, but some are calling for more action from the Fed amid worries over a protracted economic recovery.
Investor attention will shift to Powell's press conference at 14:30 ET (18:30 GMT) for further insight into the central bank's thinking on monetary policy stimulus and the economic path ahead.
Written By: Investing.com
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