Federal Reserve slashes interest rates to zero as part of wide-ranging emergency intervention

[BumRushDaShow]

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]

1. That should cut trump's debt servicing costs.

Now, if McConnell will get the U.S. taxpayers to shoulder that burden, the day will be complete!

[Newest Reality]

51. Not bad, huh?

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]

2. I'm sure that will solve all the underlying problems

[Squinch]

3. Because that worked so well in Japan, I guess.

[msongs]

4. senior living on savings and investment interest are doomed nt

[Yavin4]

5. Yep. If they survive the virus, they get no interest on their savings

The ONLY way to get a return is to gamble in the markets.

[Bengus81]

28. This is to help Trumps millionaire buddies recoup stock market losses and nothing else

Credit cards will still be at RIDICULOUS rates.

[LaurenOlimina]

6. Well, that's that used up.

[FormerOstrich]

7. tax cut, tax cut, tax cut...

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]

8. Has this ever been done in the US before?

[yaesu]

16. it has in Europe and they even seen negative interest rates which is like paying people to take

your money. It does long term damage but is done to help the stock market mainly wall street banksters.

[BigmanPigman]

17. If tRump likes it than it must be bad for the average person.

"Helps bankers" says it all.

[metalbot]

50. For 6 years during Obama administration

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]

9. Trump lambasting Powell again

saw that somewhere in a video today ... wants to replace him by next year, so Powell has scapegoat potential

[mr_lebowski]

29. Won't be his choice after Jan 20 of next year ... at the most ...

and likely won't matter to him after early November

[bucolic_frolic]

30. Let's hope so /nt

[ashredux]

10. They used all the arrows in their quiver

Long term this could be a disaster

[Maeve]

15. THIS

[bluestarone]

21. Maybe thinking a Democrat will win soooo

Let's really fuck things up for him! Just like the Dems in states that have RETHUGLICON legislature!

[Baclava]

11. Should I refinance my house now? Why aren't refinance rates going down?

[MoonlitKnight]

20. They don't have capacity to process all of the applications

So they are keeping rates artificially high.

[Baclava]

24. Well that's bullshit, I demand my lower rate like the govt promised! How long till they catch up?

[alwaysinasnit]

12. That's it. When the inevitable recession hits, the Federal Reserve will be out of tools to

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]

13. Thump squeaking now

Praising the Fed ((for caving)).

[BamaRefugee]

14. Of course all your credit card payments that you won't be able to make will still come due.

No income?
Not their problem.
Let there be debtors prisons!

[yaesu]

18. If the stock market sees this as a desperation move, which it is, it won't like it. nt

[MoonlitKnight]

19. Great, people can refinance....

Oops, not if they are unemployed. Plus mortgage rates actually went up because they don’t have enough capacity to process applications. This won’t help.

Rate cuts aren’t going to do it. It’s 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 don’t 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]

22. This screams panic!

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]

27. Most definitely panic!!

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]

23. They cut 150 basis points?

Oy. What will the markets do.....

[MarcA]

25. Cut rates to 0% so no new administration has any room left to cut?

Save the banksters and let the rest have Disaster Capitalism.

[Bengus81]

26. Meanwhile still 18-25% on most credit cards

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]

31. Sounds like usury, price gouging

We cant get away with that.

[mr_lebowski]

33. There's probably some loophole where it only counts if you're rich ...

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]

41. Rich folks don't use visa or mastercard

They use the AMEX Centurion card.

[MoonlitKnight]

32. Futures down around 4% now

Futures markets just opened at 6 eastern time.

[BumRushDaShow]

36. Thanks for the heads-up

Wasn't sure what time the futures opened!

https://www.stockmaster.com/dow-jones-futures-live-chart/

[JudyM]

40. .

Wondering... is your name from Genesis’ Dancing with the Moonlit Knight? Love that track.

[MoonlitKnight]

46. Yes

[JudyM]

47. Excellent.

Just noticed your sig line.

[Doodley]

34. What tools are left to deal with a recession?

[kyburbonkid]

37. I'll bet the Bond and Junk bond markets takes a hit.

Big move I'm sure... to what effect when the world has to shut down... not sure.

[AlexSFCA]

38. it won't help with coronavirus

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]

39. There will be another dead cat bounce

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]

44. The Dow futures are already down 1100 points.

[Bengus81]

42. Save a shit load of money on your new Yacht!!!

[Yo_Mama_Been_Loggin]

43. And the market is in the shitter none-the-less

https://www.cnn.com/2020/03/15/investing/stock-futures-global/index.html

[Nay]

45. So, now someone who has no job cuz of the virus can get a 0% loan? Eh, I didn't think so.

[Bengus81]

48. Or a new car,or much needed expensive home repairs....NAH

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]

49. Theoretically, regular loans are supposed to get cheaper as the bank rate goes down, but

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.