Federal Reserve pledges unlimited bond purchases
By Sean Farrell
Date: Monday 23 Mar 2020
(Sharecast News) - The US Federal Reserve has pledged unlimited purchases of government bonds to support businesses and consumers as the coronavirus crisis threatens economic collapse.
The central bank, headed by Jay Powell, also said it would buy unlimited amounts of agency mortgage-backed securities and set up $300bn (£258bn) of extra lending programmes to keep money flowing to businesses and households.
The Fed had planned to buy at least $500bn of Treasuries and at least $200bn of mortgage backed bonds. It has accelerated its purchases after earlier moves failed to calm stresses in debt markets. After a meeting of its open market committee at the weekend the bank has signalled it will do whatever is needed to stop the US economy imploding.
"While great uncertainty remains, it has become clear that our economy will face severe disruptions," the Fed said. "Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate."
The Fed expanded its range of support measures with two facilities to support credit to big employers by buying corporate bonds and a further plan to buy securities backed by student, car and credit card loans and loans to small businesses. It expanded programmes to ease markets for municipal debt and short-term commercial loans.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "This is an all-out effort to ensure that the business sector can continue to exist even as economic activity temporarily collapses. The Fed is now effectively the direct lender of last resort to the real economy, not just the financial system.
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