The Federal Reserve on Monday announced a batch of programs to jump-start strained lending markets across the economy, making more credit available to a wide range of businesses and consumers battered by the coronavirus outbreak, including students, car buyers, large corporations, small businesses and cities.
The Fed also said it will pump more cash into a financial system that has clogged up amid a bruising recession that has shriveled consumer spending as restaurants, movie theaters, stores, sports arenas and other public places shut down to contain the spread of the outbreak.
“The coronavirus pandemic is causing tremendous hardship across the United States and around the world,” the Fed said in a statement. “Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus. While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.”
Last week, the central bank last week lowered its benchmark interest rates near zero and said it will buy $500 billion in Treasury bonds and $200 billion in mortgage-backed securities. The Fed said Monday it will also include commercial mortgage-backed securities in the purchases, making more money available for loans for retail, office and other commercial real estate projects and pushing down their interest rates.
It also says it will buy an unlimited amount of Treasury bonds and mortgage-backed securities in an effort hold down interest rates and ensure those markets function smoothly.
Markets reversed sharply after the announcement. Dow Jones futures swung more than 1,000 points from about 500 down to a rise of roughly 500. The yield on the 10-year Treasury bond also fell, a sign that more investors are willing to purchase the securities.
The Fed also said it will set up three new lending facilities that will provide up to $300 billion by purchasing corporate bonds, buying a wider range of municipal bonds, and purchasing asset-backed securities. The central bank also said it will renew a financial-crisis era program that will make funding available for student, auto and credit card loans.
After the Fed announced the Treasury and mortgage bond purchases last week, it quickly ran through roughly half those amounts by the end of the week. On Monday, the New York Federal Reserve said it would purchase $75 billion of Treasuries and $50 billion of mortgage-backed securities each day this week.
That is a much larger amount than the Fed deployed in the financial crisis and its aftermath. In 2012 the Fed launched its third round of asset purchases, known as quantitative easing, which consisted of $45 billion of Treasury purchases a month.
Contributing: Associated Press