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. Last week's drops also confirmed the end of the longest-ever bull market on Wall Street, which emerged from the financial crisis and ran for almost 11 years. The central banks aim to increase the swap lines' effectiveness in providing term liquidity by offering US dollars weekly in each jurisdiction with an 84-day maturity, in addition to the one-week maturity operations now offered.
In another move, it removed bank reserve requirements to allow them to use cash backstops.
"Global financial conditions have also been significantly affected". Asia's top oil refinery Sinopec said on Monday that its Guangzhou refinery is able to produce very low-sulphur fuel oil (VLSFO) for the marine bunker fuel market.
About 55 business and academic economists recently polled by The Wall Street Journal expect, on average, US gross domestic product (GDP) to contract at an annual rate of 0.1 percent in the second quarter due to the epidemic. I didn't expect this. I like being surprised.
The best-case scenario for many investors is that the economic shock will be steep but short, with growth recovering later this year after businesses reopen.
But "after that it becomes hard to say", and "it's going to depend again on the path of the virus", Powell said in a call with reporters following the emergency meeting of the Fed's policy-setting Federal Open Market Committee.
The central bank said in its statement that the outbreak will affect economic activity in the near term and pose risks to economic expectations.
One FOMC member dissented from the vote.
Cleveland Fed President Loretta Mester was the only "no" vote, preferring to set rates at 0.5% to 0.75%.
The moves follow a stock-market meltdown that has seen equity prices enter bear territory on investor fears of the mounting economic toll from the spreading coronavirus and what they see as the inadequate response from global policy makers, including the Trump administration.
The question of whether the Fed would follow in the footsteps of the European Central Bank (ECB) has been around for a while now, but at least for now, it seems the US central bank hopes to avoid that.
The statement also noted steps to boost lending, including lowering the rate charged to banks for short-term emergency loans from its discount window to 0.25 percent from 1.75 percent.
Officials said they also would buy at least $700 billion of Treasury and mortgage-backed securities to help maintain smooth functioning of financial markets.
The selling began immediately on Wall Street, and losses were sharp enough at the open to trigger a temporary trading halt for the third time in the last two weeks.
"Time is of the essence". The Treasury market is the largest and most important such market in the world, because yields on Treasuries influence interest rates on many other loans and are used to price other global financial assets.
However, he echoed the feelings of many in calling for more aggressive spending measures by the government.
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