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US cuts rates to zero and introduces huge stimulus programme

Komal FatimaWeb Editor

16th Mar, 2020. 03:38 pm
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US cuts rates to zero and introduces huge stimulus programme

The US has decreased interest rates almost zero to protect the economy from the influence of coronavirus.

According to the international news agency, the US has also introduced $700 bn stimulus programme in a bid to conserve the economy.

It is a part of a coordinated action declared in the UK, Japan, Eurozone, Canada and Swirtzerland.

Fed Chairman Jerome Powell said in a press conference the pandemic was creating a “profound” impact on the economy.

US President Donald Trump said the emergency action taken “makes me very happy”.

International news agency say that The Fed has cut rates to a target range of 0% to 0.25%, and said it would it begin buying bonds – quantitative easing – a move that pumps money directly into the economy.

An emergency meeting was held on 3rd March after which the Central Bank had cut interest rates by half a percentage point.

This rate cut is reported to be the first outside of a regularly scheduled policy meeting since financial crisis in 2008.

Stock markets have plunged these days after fears that decrease in economic activities will wipe out corporate profits and spark a global recession.

But early indications suggest the Fed’s move may not shore up financial markets. US stock market futures, which anticipate the direction of shares when trading begins, were almost 4% down.

Mr Powell spoke at the emergency meeting in which he said, “The economic outlook is evolving on a daily basis and it is depending on the spread of the virus… that is not something that is knowable,”

The Fed will work with other central banks to stimulate the availability of dollars for commercial banks.

“Today’s coordinated action by major central banks will improve global liquidity by lowering the price and extending the maximum term of US dollar lending operations,” Bank of England Governor Mark Carney said in a joint statement with Andrew Bailey, who succeeds him as BoE chief on Monday.

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