Fed Cuts Rates to Zero and Launches Massive QE 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 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.