Federal Reserve slashes interest rates to zero as part of wide-ranging emergency intervention
Source: Washington Post
The Federal Reserve made an emergency interest rate cut to zero on Sunday night, a dramatic step meant to make borrowing as cheap as possible for American households and businesses as the coronavirus brings the U.S. economy to a near standstill.
The benchmark U.S. interest rate will now be in a range of 0 to 0.25 percent, effectively bringing the rate to zero as President Trump has urged for months. the Fed also announced a significant increase in its bond purchases, a move similar to the large scale quantitative easing the central bank did in the aftermath of the Great Recession to try to get money flowing again in markets and the broader economy.
The [Fed] expects to maintain this target range until it is confident that the economy has weathered recent events, the central bank wrote in a statement released Sunday evening. (sic) the Fed vowed to use its full range of tools to support the economy and the smooth functioning of markets. The actions came as the economy was hurtling toward a recession as the coronavirus outbreak shut down wide swaths of U.S. society. All but one Fed leader voted in favor of the extraordinary actions. Cleveland Fed President Loretta Mester preferred to keep interest rates slightly higher, but she was overruled.
The central bank will beef up its purchases of U.S. Treasurys by $500 billion over the coming months, along with another $200 billion of mortgage-backed securities. The moves Sunday come on the heels of the Fed making an emergency interest rate cut on March 3 and a large $1.5 trillion injection into the bond market last week to ensure sufficient liquidity for normal market operations.
Read more: https://www.washingtonpost.com/business/2020/03/15/federal-reserve-slashes-interest-rates-zero-part-wide-ranging-emergency-intervention/
Turbineguy
(37,365 posts)Now, if McConnell will get the U.S. taxpayers to shoulder that burden, the day will be complete!
Newest Reality
(12,712 posts)Getting the oval office has such perks these days.
I wish we could do that. We just get huge loan fees, interest rates and lots of compounding on the compounding.
IronLionZion
(45,528 posts)Squinch
(51,004 posts)msongs
(67,441 posts)Yavin4
(35,445 posts)The ONLY way to get a return is to gamble in the markets.
Bengus81
(6,932 posts)Credit cards will still be at RIDICULOUS rates.
LaurenOlimina
(1,165 posts)FormerOstrich
(2,703 posts)We are experiencing why we should not have continued the stimulus efforts for Trump political gains (disguised as mo' for middle class 401K). Ya kept it hot for greed...ain't much you can do about it now your really need some stimulus.
BigmanPigman
(51,627 posts)yaesu
(8,020 posts)your money. It does long term damage but is done to help the stock market mainly wall street banksters.
BigmanPigman
(51,627 posts)"Helps bankers" says it all.
metalbot
(1,058 posts)We were at or near zero from mid 2009 to the end of 2015.
As a monetary policy, this isn't new, but it's also the last major arrow in the quiver of the federal reserve. Negative interest rates are an option, but that would be enormously scary.
bucolic_frolic
(43,281 posts)saw that somewhere in a video today ... wants to replace him by next year, so Powell has scapegoat potential
mr_lebowski
(33,643 posts)and likely won't matter to him after early November
bucolic_frolic
(43,281 posts)ashredux
(2,608 posts)Long term this could be a disaster
bluestarone
(17,030 posts)Let's really fuck things up for him! Just like the Dems in states that have RETHUGLICON legislature!
Baclava
(12,047 posts)MoonlitKnight
(1,584 posts)So they are keeping rates artificially high.
Baclava
(12,047 posts)alwaysinasnit
(5,072 posts)ameliorate it. Then again, they may be considering a NIRP (Negative Interest Rate Policy).
https://www.investopedia.com/terms/n/negative-interest-rate-policy-nirp.asp
What Is a Negative Interest Rate Policy (NIRP)?
A negative interest rate policy (NIRP) is an unconventional monetary policy tool employed by a central bank whereby nominal target interest rates are set with a negative value, below the theoretical lower bound of zero percent. A NIRP is a relatively new development (since the 1990s) in monetary policy used to mitigate a financial crisis.
Explaining Negative Interest Rate Policies (NIRPs)
A negative interest rate means that the central bank (and perhaps private banks) will charge negative interest. Instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe. This happens during a negative interest rate environment.
During deflationary periods, people and businesses hoard money instead of spending and investing. The result is a collapse in aggregate demand, which leads to prices falling even further, a slowdown or halt in real production and output, and an increase in unemployment. A loose or expansionary monetary policy is usually employed to deal with such economic stagnation. However, if deflationary forces are strong enough, simply cutting the central bank's interest rate to zero may not be sufficient to stimulate borrowing and lending.
_______________
That's right, instead of getting (puny) interest on your savings accounts, you will have to pay the bank for the privilege of holding your money.
nitpicker
(7,153 posts)Praising the Fed ((for caving)).
BamaRefugee
(3,487 posts)No income?
Not their problem.
Let there be debtors prisons!
yaesu
(8,020 posts)MoonlitKnight
(1,584 posts)Oops, not if they are unemployed. Plus mortgage rates actually went up because they dont have enough capacity to process applications. This wont help.
Rate cuts arent going to do it. Its helicopter money time. We tried bailing out businesses and rate cuts last time and the money just went to the already well off.
Start sending checks. Big checks. And order the suspension of all rent and mortgage payments. Companies can access zero percent loans to cover the interest so consumers dont get stuck with it by having it added on to the mortgage balance.
Do the same with student loans. Suspend payments and mandate refinancing at one percent interest- which leaves plenty of profit margin.
earthside
(6,960 posts)Chaos, confusion, panic.
Zero fed rate won't help this ...
Here's what could really sink the global economy: $19 trillion in risky corporate debt
https://www.cnn.com/2020/03/14/investing/corporate-debt-coronavirus/index.html
blue-wave
(4,363 posts)My first thought was "oh no, they are going negative!!" That's next and it won't be good. They will also have the money printing machines glowing red hot. So hang on everybody, it's going to be the bumpiest ride you could ever imagine.
RussBLib
(9,035 posts)Oy. What will the markets do.....
MarcA
(2,195 posts)Save the banksters and let the rest have Disaster Capitalism.
Bengus81
(6,932 posts)I have a US Bank card that's almost 14% before any FED cuts,let's see what it drops to since it's tied to the Prime rate.
RussBLib
(9,035 posts)We cant get away with that.
mr_lebowski
(33,643 posts)Just like you can't get a better deal on a home re-fi right now, nobody's credit card interest will go down either.
These things are done for the benefit of the Elite, not regular folks.
discntnt_irny_srcsm
(18,482 posts)They use the AMEX Centurion card.
MoonlitKnight
(1,584 posts)Futures markets just opened at 6 eastern time.
BumRushDaShow
(129,440 posts)Wasn't sure what time the futures opened!
https://www.stockmaster.com/dow-jones-futures-live-chart/
Wondering... is your name from Genesis Dancing with the Moonlit Knight? Love that track.
JudyM
(29,274 posts)Just noticed your sig line.
Doodley
(9,124 posts)Response to BumRushDaShow (Original post)
Bengus81 This message was self-deleted by its author.
kyburbonkid
(251 posts)Big move I'm sure... to what effect when the world has to shut down... not sure.
AlexSFCA
(6,139 posts)they should put 1.5 trillion into solving the health crisis instead of banks. You can do a lot with that money, like having mass rapid testing and buying/renting hotels for hospital extensions and quarantines, etc. Buy or manufacture 1 million ventilators.
eilen
(4,950 posts)in the morning.
They think this will keep Friday's momentum.
Btw. no rates and the QE... It still won't work.
mr "greatest economy ever" should start making moving plans.
I don't see this WH/Senate allowing anything meaningful to help the people. They won't even legislate sick pay in a state of emergency during an unprecedented pandemic.
Mnuchin wants to use this crisis to claw back Dodd-Frank.
BumRushDaShow
(129,440 posts)Bengus81
(6,932 posts)Yo_Mama_Been_Loggin
(108,192 posts)Nay
(12,051 posts)Bengus81
(6,932 posts)And...actually that zero % BS is what banks charge each other. So other loans might still be 2-3+% IF you can qualify. Hell...they've had 0% new car loans for years so I'm not sure what Trump was thinking this would do for the economy.
Guess Wall St has the answer---DOWN 1043 points in the futures market. See what happens for real in a couple of minutes.
Nay
(12,051 posts)you and I know they just rake in more money for themselves. My credit card rate hasn't dropped! So it's all bullshit, and only helps big banks.