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FED cuts rates to ZERO

Discussion in 'BBS Hangout' started by Xerobull, Mar 15, 2020.

  1. Xerobull

    Xerobull Salve Dicit Mater Tua
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    https://www.cnbc.com/amp/2020/03/15...-700-billion-quantitative-easing-program.html


    ECONOMY
    Federal Reserve cuts rates to zero and launches massive $700 billion quantitative easing program

    In an emergency move Sunday, the Federal Reserve announced it is dropping its benchmark interest rate to zero and launching a new round of quantitative easing.
    • The QE program will entail $700 billion worth of asset purchases entailing Treasurys and mortgage-backed securities.
    • Markets responded negatively, with Dow futures pointing to a drop of 900 points when the market opens Monday morning.
    [​IMG]
    Federal Reserve Chair Jerome Powell holds a news conference following the Federal Open Market Committee meeting in Washington, December 11, 2019.
    Joshua Roberts | Reuters
    The Federal Reserve, saying "the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States," cut interest rates to essentially zero on Sunday and launched a massive $700 billion quantitative easing program to shelter the economy from the effects of the virus.

    The new fed funds rate, used as a benchmark both for short-term lending for financial institutions and as a peg to many consume rates, will now be targeted at 0%-0.25% down from a target range of 1% to 1.25%.

    Facing highly disrupted financial markets, the Fed also slashed the rate of emergency lending at the discount window for banks by 125 bps to 0.25%, and lengthened the term of loans to 90 days.

    Despite the aggressive move, the market's initial response was negative. Futures pointed to a decline of some 900 points at the Wall Street open Monday morning.

    The discount window "plays an important role in supporting the liquidity and stability of the banking system and the effective implementation of monetary policy ... [and] supports the smooth flow of credit to households and businesses," a separate Fed note said.

    The discount window is part of the Fed's function as the "lender of last resort" to the banking industry. Institutions can use the window for liquidity needs, though some are reluctant to do as it can indicate they are experiencing financial issues and thus sends a bad message.

    The Fed also cut reserve requirements for thousands of banks to zero. In addition, in a global coordinated move by centrals banks, the Fed said the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank took action to enhance dollar liquidity around the world through existing dollar swap arrangements.


    The banks lowered the rate on these swap line loans and extended the period for such loans. Fed Chairman Jerome Powell is scheduled to hold a press conference via telephone at 6:30 pm ET. The actions by the Fed appeared to be the largest single day set of moves the bank had ever taken, mirroring in many ways its efforts during the financial crisis that were rolled out over several months. Sunday's move includes multiple programs, rate cuts and QE, but all in a single day.

    The quantitative easing will take the form of $500 billion of Treasurys and $200 billion of agency-backed mortgage securities. The Fed said the purchases will begin Monday with a $40 billion installment.

    The Fed cut rates from the previous target range of 1% to 1.25% and said it would remain there "until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals."

    Cleveland Fed President Loretta Mester was the lone no vote, preferring to set rates at 0.5% to 0.75%, which would have represented a 50 basis point, of half percentage point, reduction.

    The Fed added in its statement that it "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."

    It appeared, though it was not entirely clear, that the meeting that took place will replace the regularly scheduled meeting of the Federal Open Market Committee.

    The move follows several actions by the Fed over the past two weeks in which it enacted a 50 basis point emergency rate cut and expanded the overnight credit offering, or repo, for the financial system up to $1.5 trillion.
     
    saitou likes this.
  2. marks0223

    marks0223 Astros STILL 2017 Champions
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    And futures are still down a 1,000 points.
     
  3. ThatBoyNick

    ThatBoyNick Member

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    So I can go buy a house at zero percent interest now? :cool:
     
    superfob likes this.
  4. Andre0087

    Andre0087 Member

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    LOL, only if we go into negative rate territory...maybe.
     
  5. Andre0087

    Andre0087 Member

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    They sure do work quick, wish Congress could help us the people out in such a manner.
     
  6. No Worries

    No Worries Contributing Member

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    With the zero interest rate, I can now afford that around the world cruise on my bucket list.
     
  7. Invisible Fan

    Invisible Fan Insider Newsletter™ 2X Diamond Member

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    Three for the price of one!

    Bigly deals for all!
     
    No Worries and peleincubus like this.
  8. B-Bob

    B-Bob my celli weighs a ton
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    I have... zero interest... in tha Fed right about nowsers.
     
  9. RKREBORN

    RKREBORN Member

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    Your font annoys me...
     
    Bandwagoner and Andre0087 like this.
  10. JeeberD

    JeeberD Contributing Member

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    My wife and I are currently going through a refi at 2.625%...and we get a one-time option to elect a lower rate, if it does get lower. I wonder what the rates will look like tomorrow?
     
  11. Nook

    Nook Member

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    This is nice. There will be a recession. I am sure the President will do everything possible to put it off until post election; but it is coming.
     
    seemoreroyals and KingCheetah like this.
  12. CCorn

    CCorn Member

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    I’m just here to make helicopter and zoo jokes
     
    B-Bob and Xerobull like this.
  13. Hakeemtheking

    Hakeemtheking Member

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    15-year?

    Would you mind sharing the lender? I'm trying to do a refi, excellent credit and work history, and quicken loans is quoting me at 3.5%.
     
    JeeberD likes this.
  14. Andre0087

    Andre0087 Member

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    ...and that slow bastard is the last person you want in office during it. He'll make GWB look like FDR.
     
    Jontro and Hakeemtheking like this.
  15. pippendagimp

    pippendagimp Member

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    next up buying commercial paper and equities

    still not as bad as europe, where they'll need to nationalize companies and possibly cancel the euro!
     
  16. JeeberD

    JeeberD Contributing Member

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    Yep, 15 year. RBFCU.org
     
    Hakeemtheking likes this.
  17. DonnyMost

    DonnyMost clean your room bucko

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    I was aiming at buying a home in early 2021 but I might have to accelerate my timetable with this. Jeebus.
     
  18. No Worries

    No Worries Contributing Member

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    Font is used to indicate sarcasm.

    70% of the US economy is consumer spending. Lower interest rates will not overcome the drop in spending caused by the CV.
     
    Phillyrocket and weakfromtoday like this.
  19. Phillyrocket

    Phillyrocket Member

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    If you want a HELOC this is absolutely the best time.
     
  20. Mr. Brightside

    Mr. Brightside Contributing Member

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