On Sunday evening at 5 p.m. local time, the US Federal Reserve took the big hammer and raised the alarm. It lowers key interest rates to zero. Central Bank Chairman Jerome Powell made this surprising announcement in Washington. The new range is zero to 0.25 percent – one percentage point lower than before.
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“The effects of the corona virus will put a strain on economic activity in the short term and pose a risk to economic development,” the Fed justified the move. The new range will remain at this level until the economy has weathered recent developments and is back on track to meet its employment and price stability targets.
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Second rate cut in two weeks
The virus is forcing the American central bank to act: within two weeks, the Fed is lowering the key interest rate for the second time – and is trying to cushion the consequences of the coronavirus pandemic for the economy. Most recently, the Fed cut key interest rates by half a percentage point on March 3. It was the first rate cut since the 2008 financial crisis outside of a regular meeting of its members. The next meeting is scheduled for Tuesday and Wednesday. Further measures, also in coordination with other central banks, are intended to stabilize the US and global financial system.
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The U.S. central bank also plans to add $ 700 billion of its securities holdings on a large scale. A short-term recovery is expected on the stock exchanges. But initially, the markets saw the Fed decision as a sign of panic. The dollar fell along with US stock futures. Stock market futures in the main US indices were around three percent in the red. (kes / SDA)
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