The US Federal Reserve will pump more than $1 trillion as it ramps up its market intervention as coronavirus melts down the economy.
- The Fed announced a bold new initiative in an effort to calm market tumult amid the coronavirus meltdown.
- In all, the new moves pump in up to $1.5 trillion into the financial system in an effort to combat potential freezes brought on by the coronavirus.
- This was the second day in a row and the third time this week the Fed has stepped in.
- Stocks staged a sharp turnaround from earlier losses, though some of those gains were pared.
“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed said in an early afternoon announcement amid a washout on Wall Street that was heading toward the worst day since 1987.
Stocks were off their lows following the announcement though some of the gains were pared as the market digested the moves. Some in the market were skeptical that the move was enough, and even whether the the Fed itself had the proper tools to reverse the current market downtrend.
“We continue to emphasize that this Fed will act aggressively and in particular that central banks are focused on safeguarding market functioning at this point, and will continue to provide liquidity in scale,” Ebrahim Rahbari, director of global economics at Citi Research. “However, despite the sharp initial risk rally, we think these measures will still not be sufficiently to durably stabilize market sentiment yet in light of credit concerns and escalating health concerns.”
One part of the announcement saw the Fed widen the scale for its $60 billion worth of money the Treasury purchases, which to now had been confined to short-term T-bills.
