Business & Economy

US slashes rates to near zero, launches huge stimulus program

By Alfonso Fernández

Washington DC, Mar 15 (efe-epa).- The United States Federal Reserve on Sunday launched the largest monetary stimulus package since the financial crisis of 2008, with a sudden cut in interest rates to almost 0 percent and a liquidity injection of $700 billion to bolster the country against the coronavirus impact.

“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected,” the Federal Reserve statement said.

“The Federal Reserve 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.”

The bank’s decision denotes the alert within the central bank in the face of growing signs that the pandemic may slow global economic activity.

It added that interest rates cut to 0-0.25 percent will be maintained “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

It is the second time in under two weeks that the US central bank has cut interest rates in the face of growing concern about the economic impact of the coronavirus. On Mar. 3 it also suddenly announced an emergency half-percentage-point rate cut to sit between 1-1.25 percent.

In an impromptu telephone news conference on Sunday afternoon, Federal Reserve Board Chairman Jerome Powell for the time being ruled out the possibility of adopting negative interest rates, as other central banks have done.

“We do not see negative policy rates as likely to be an appropriate policy response here in the United States,” he said.

He did, however, urge Congress to pass a proposed fiscal stimulus package to support households and businesses.

The emergency measures of the US central bank are of enormous magnitude.

In addition to the rate cut, the Fed will buy $500 billion in Treasury securities and $200 billion in mortgage-backed securities to provide an injection of liquidity into the system.

It also announced a coordinated measure with the central banks of Canada, England, Japan, Switzerland and the European Central Bank, to increase the availability of dollars for commercial banks through swap line arrangements.

Just minutes after the announcement, President Donald Trump said he was “very happy” with the Fed’s decision, which he has repeatedly criticized, and was optimistic about a good reaction in the stock markets, which suffered heavy losses in recent days.

“I have to say this, I’m very happy… People in the market should be thrilled,” he said. “We’re the strongest country in the world, financially and every other way.” EFE-EPA

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