Fed pledges unlimited asset purchases to support markets

by Adam Ford · Mar 23rd, 2020 8:41 am

The Federal Reserve took further drastic action Monday to try to curtail economic collapse due to coronavirus, pledging to continue asset purchases with essentially no limit — specifically, "in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy."

The central bank also said it would begin purchasing commercial mortgage-backed securities issued by government-supported entities.

The Wall Street Journal reports:

The central bank announced plans for two lending facilities to support corporate credit markets. One will lend to investment-grade companies and provide bridge financing of four years, while a second will buy corporate bonds issued by highly rated companies and U.S.-listed exchange-traded funds in the investment-grated corporate-bond market.

Those three facilities are designed to support $300 billion in new financing, and the Treasury Department will cover $30 billion in losses.

The central bank said:

"While great uncertainty remains, it has become clear that our economy will face severe disruptions. 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 move represents an major escalation of Fed intervention in markets. Despite the incredibly aggressive action, as of Monday morning the stock market was 2% in the red.


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