The US Federal Reserve (Fed) has announced that it will take new steps to reduce the effects of the coronavirus outbreak. The Central Bank stated that it is going through a challenging process, and explained what it will do to “support the US economy, households and businesses across the country”.
The Fed announced that it would provide extra credit flows to the private sector to support businesses affected by the coronavirus outbreak. The Fed also announced that it would buy Treasury bonds and mortgage-backed securities to support the economy.
The Fed had already made a decision a few days ago regarding Treasury bonds and mortgage-backed securities. In line with this decision, the Fed set a limit of $ 500 billion in bond purchases and $ 200 billion in securities purchases. However, with the announcement published today, the Fed removed these limits and officially announced that it could buy infinite amounts of bonds.
The Fed has lowered interest rates to combat the Coronavirus so far, announced it will inject more than $ 1 trillion in the economy, and after negotiations with other central banks, it has decided to expand its swap channels. Despite all this, Fed markets, which could not prevent the coronavirus wave, are now trying to control them with endless bond purchases. Although the Fed’s move is expected to ease the economy in the short term, we will see what consequences it will have in the long term.