The Federal Reserve, the Federal Reserve of the United States of America, has decided to drastically reduce bank interest rates in an effort to cope with global economic conditions. The rate has fallen 0.0% to 0.25% since Sunday.
According to Kevin Disk, the US Federal Reserve has adopted zero interest rate policies once again, this time due to the outbreak of Corona. The interbank rate cut came at a meeting of the Federal Open Market Committee. The meeting was scheduled to take place on Tuesday, which was postponed by the emergency on Sunday.
It has been years since we last saw such a decline in interest rates. The Bank of America adopted such a policy for the last time in a 2008 year. Thereafter, and by year 2018, the interest rate reached 2.5 percent. Last week, interest rates fell from 1.25% to 1%. The Federal Free Trade Committee states in its statement:
The outbreak of Coronation has affected various communities and disrupted economic activity in many countries around the world. The global economy has also been greatly affected by the disease. Economic data show that the US economy has acted strongly against the virus.
All members of the committee voted in favor, with the exception of Cleveland Federal Reserve Chairman Loretta Master. Mr. Master agreed with the idea of lowering the bank interest rate but believed that the figure should range from .5 to 0.75%.
Reducing bank interest rates was not the only measure of the Federal Reserve. It also decided to buy $ 500 billion in Treasury bonds and $ 200 billion in mortgage-backed securities (MBS). Such measures will inject more dollars into the economy, as it will pull the bonds out of the banks’ balance sheets and invest capital into the balance sheets that banks can lend. Doing so will also reduce bank interest rates. When this volume of bond purchases is made, the interest on the bonds will decrease as the bond prices rise. The $ 5 trillion assets are currently in the Federal Reserve, a record of its kind.
This is the fourth decline in bank interest rates since the recent financial crisis that happened about a decade ago.
Last week, the Federal Reserve announced that it plans to repurchase $ 1.5 trillion of contracts, at least three months after their contract expires. This will increase banks’ short-term liquidity and help the central bank move along with its set interest rate goals.
The news re-energized the stock markets and slightly reduced Friday’s losses. After the five stock prices fell, trading in the Dow Jones futures market stopped. This decline also activated the “cut-off” mechanism in the market. This mechanism is a security function activated in times of severe market crash.
However, the bitcoin market jumped 7.7% as the news came out. The king of digital currencies jumped from just $ 5182.70 to $ 5582.62 per unit just hours after the Federal Reserve announced bank interest rates. Of course, this growth did not last, and at the moment bitcoin is trading at $ 5017.
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