Fed ramps up effort to help US economy

Published March 24, 2020, 12:00 AM

by manilabulletin_admin

WASHINGTON (AFP) – The Federal Reserve launched an unprecedented effort on Monday to flood the US economy with money amid the chaos caused by the coronavirus pandemic, as Congress debated a rescue plan for American workers and companies.

Like patients around the world battling the disease itself, the US economy is on life support, with some forecasters projecting a 14 percent contraction in the April- June quarter while the global economy could shrink 1.5 percent this year.

US President Donald Trump praised Federal Reserve Chairman Jerome Powell on Monday, ending his criticism of the central bank chief while also calling the strong dollar ”good,” an unusual comment.

”I called up Jerome Powell and I said, ‘Jerome, you’ve done a really good job,”’ Trump said during a daily White House briefing on the coronavirus pandemic, which has hammered the American economy and sent lawmakers scrambling to agree on a trillion-dollar stimulus package.

The Fed had already announced it would buy at least $500 billion of Treasury debt as well as $200 billion of mortgage-backed debt, but now has committed to buying ”in the amounts needed to support smooth market functioning.”

The Fed’s New York branch, which handles the financial transactions, said it would start out by purchasing $75 billion per-day in Treasuries and $50 billion per-day in mortgage-backed securities.

In the latest action, the Fed revived facilities it last used during the 2008 global financial crisis, and expanded others an¬nounced in recent days, including buying debt issued by US municipalities and by corporations.

About a third of Americans have been ordered to stay at home, and the Fed warned of ”severe disruptions” from the virus as it rolled out another series of measures to pump funds into the economy, including buying unlimited amounts of government debt – a move akin to printing money.

But while that should provide oxygen to the financial system and keep businesses open, lawmakers continued haggling over an emergency aid package, with Democrats in the House unveiling a proposal that would cost a whopping $2.5 trillion as they demanded more funds to help workers directly and more strings on any aid going to corporations.