WASHINGTON: Faced with a growing economic shutdown from the coronavirus pandemic, the US Federal Reserve on Sunday announced drastic emergency measures to shore up confidence and keep the financial sector running, including slashing the key interest rate to virtually zero.
The action was coordinated with the European Central Bank, Bank of England, Bank of Japan, Bank of Canada and the Swiss National Bank. The massive show of financial force, coming as more countries are on lockdown due to the spread of the Covid-19 illness, aims to contain the economic fallout as businesses are forced to shut their doors in an already sluggish global economy.
The committee, which had been due to hold a regularly-scheduled two-day meeting starting Tuesday, vowed to “use its tools and act as appropriate to support the economy,” though what tools it has left is a question.Cleveland Fed President Loretta Mester objected only to the move to take the federal funds rate nearly to zero.
And it encouraged banks to make use of low-cost short-term loans from the central bank, saying “depository institutions may borrow from the discount window for periods as long as 90 days, prepayable and renewable by the borrower on a daily basis.”
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