The Federal Reserve announced on Sunday that it dropped its benchmark interest rate by a full point and launched a massive $700 billion quantitative easing program.
“The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook,” the Federal Reserve said in a statement. “In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
“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 statement continued. “To support the smooth functioning of markets for Treasury securities and agency mortgage-backed securities that are central to the flow of credit to households and businesses, over coming months the Committee will increase its holdings of Treasury securities by at least $500 billion and its holdings of agency mortgage-backed securities by at least $200 billion.”
Federal Reserve Chairman Jerome Powell said in a statement that the role of the Federal Reserve “is guided by our mandate from Congress to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system.”
“Today, we reduced the target range for our policy interest rate by 1 percentage point, bringing it close to zero, and said that we expect to maintain the rate at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals,” Powell continued. “In addition, we took other actions to support the flow of credit to households and businesses.”
The announcement from the Federal Reserve came moments before President Donald Trump held a press conference on Sunday to address the latest updates in the administration’s efforts to combat the coronavirus.
“We’re all going to be great,” Trump said while instructing people to not hoard food and supplies. “We are going to be so good.”
“What’s happened with the Fed is phenomenal news,” Trump continued. “What’s happening with all these incredible companies is phenomenal news, but you don’t have to buy so much, take it easy, just relax. People are going in, they are buying more … relax, we are doing great, it all will pass.”
“Again, [CEOs of major companies] have asked me to say [to the public], ‘could you buy a little bit less, please?’,” Trump continued. “I thought I would never hear that from a retailer. All of them are working hand in hand with the federal government as well as the state and local leaders to ensure food and essentials are constantly available and they’ll do it.”
“There’s no shortages, we have no shortages other than people are buying and where from three to five times what they normally buy,” Trump continued.
“Our supply chains in America are the most powerful in the world and they’re all working very hard, they are working around the clock and the stores are stocking up at level that is beyond Christmas time,” Trump continued. “There is no need for anybody in the country to hoard essential food supplies. You don’t have to buy the quantities.”
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