Fed Cuts Interest Rate All The Way To Near Zero, But Is It Enough?

(PatriotHeadline.com) – In what is a truly unprecedented move, The Federal Reserve said Sunday that it would cut interest rates by a full percent to near zero.

It’s the first time in history the Fed has made emergency rate cuts twice between scheduled meetings. On March 3, Jerome Powell, the fed chairman, announced interest rate cuts of 50 basis points.

In addition to the cut in interest rates, the Fed said it will also launch a bond-buyback program, all in an effort to curb the market collapse and future market uncertainty due to the worldwide coronavirus pandemic.

As Powell said during a press conference Sunday night:

“We have responded very strongly not just with interest rates but also with liquidity measures today.”

The Fed plans to buy back at least $200 billion in mortgage-backed securities and at least $500 billion in Treasury securities starting Monday, Powell said, “until it is confident that the economy has weathered recent events and is on track.”

President Donald Trump said he was “very happy” about the new Fed’s interest rate, something he has been extremely critical of in the past. During a Sunday press conference held at the White House, Trump said:

“I want to congratulate the Federal Reserve … I think that people in the markets should be very thrilled.”

Trump reportedly was urging Steve Mnuchin, the Treasury Secretary, to talk Powell into cutting interest rates and being more aggressive once stock markets entered a bear market recently. And despite the announced interest rate cut and bond buyback program, stocks probably won’t perform well in the near term.

Ahead of trading Monday morning, stocks plunged across the world, with futures dropping almost 5%. The yield on the 10-year U.S. Treasury note also dropped from 0.946% at Friday’s close to 0.794%.

At the same time, the International Monetary Fund announced Monday that it “stands ready” to use its large lending capacity to aid countries that are struggling to combat the economic impact the coronavirus has had thus far.

Kristalina Georgieva, the managing director of the IMF, wrote:

“As a first line of defense, the Fund can deploy its flexible and rapid-disbursing emergency response toolkit to help countries with urgent balance-of-payment needs. The Fund already has 40 ongoing arrangements — both disbursing and precautionary — with combined commitments of about $200 billion. In many cases, these arrangements can provide another vehicle for the rapid disbursement of crisis financing.”

Georgieva said the lending could help member countries, especially those considered emerging and developing. Its Catastrophe Containment and Relief Trust “can help the poorest countries with immediate debt relief, which will free up vital resources for health spending, containment, and mitigation,” she wrote.

Despite the Fed’s announcement and the IMF’s as well, investors still aren’t convinced — at least if you look at the market results. The SPDR S&P 500 ETF Trust, a fund that tracks the S&P 500, dropped by more than 9% in premarket trading Monday morning.

For now at least, it seems investors are concerned that not enough is being done to curb the economic impact of the coronavirus here and abroad.