The Federal Reserve on Sunday released a list of roughly 750 companies, including Apple, Walmart and ExxonMobil, whose corporate bonds it will purchase in the coming months in an effort to keep borrowing costs low and smooth the flow of credit.
Federal Reserve Chairman Jerome Powell reiterated his belief that Congress must avoid withdrawing its own rescue efforts too quickly or else the most disadvantaged households would disproportionately suffer.
The program will purchase existing bonds on the open market, as opposed to newly-issued debt. The announcement boosted the stock market, which was already rebounding from early losses.
Chairman Jerome Powell stressed the Fed’s commitment to ultra-low borrowing rates for the foreseeable future. “We’re not thinking about raising rates,” he said. “We’re not even thinking about thinking about raising rates.”
The Federal Reserve is expanding the range of companies that will qualify for its soon-to-begin Main Street Lending Program, in which the Fed will lend directly to individual companies for the first time since the Great Depression.
Federal Reserve Chair Jerome Powell acknowledged Friday that the Fed faces a major challenge with the launch in the coming days of a program that will lend to companies other than banks for the first time since the Great Depression.
Federal Reserve Chairman Jerome Powell said that while the Fed has received a “good deal of interest” in its lending programs, if not enough companies or state and local governments seek to borrow, the Fed would consider expanding their eligibility.
The nationwide look at the outbreak’s impact on the economy came from the Federal Reserve’s report known as the beige book, compiled from information supplied by the Fed’s 12 regional banks.
The Fed said Thursday that it is activating a Main Street Business Lending Program authorized by the CARES Act, the largest economic relief package ever passed by Congress.
Federal Reserve Chairman Jerome Powell said the Fed was “not going to run out of ammunition” when it came to helping the economy recover quickly once the threat from the virus has passed.
The central bank’s all-out effort has now gone beyond even the extraordinary drive it made to rescue the economy from the 2008 financial crisis. Financial markets sharply reversed themselves after the announcement.
Starting Tuesday, the central bank will buy significant amounts of commercial paper, the short-term loans that businesses rely on for funding to pay bills and other expenses.
The central bank said the effects of the outbreak will weigh on economic activity in the near term and pose risks to the economic outlook.
On Thursday, the Fed unveiled a massive short-term lending program to try to help smooth trading in U.S. Treasuries. Many economists now expect the Fed to slash its benchmark interest rate by a full percentage point, to nearly zero, at its policy meeting next week.
In question is how much effect rate cuts will actually have amid a health emergency that threatens to reduce both supply and demand in the economy.
U.S. stock markets saw more major declines Friday morning. Traders have been growing increasingly certain that the Federal Reserve will be forced to cut interest rates to protect the economy, and soon.
The draft rule approved by the Federal Reserve would exempt venture capital funds from the Volcker Rule’s provision that bars banks from investing in hedge or private equity funds.
The Federal Reserve sketched a mostly positive picture of the U.S. economy after its latest policy meeting. It also repeated its pledge to “monitor” the world economy, which may be held back in the coming months by China’s viral outbreak.
In a sign of the Fed’s confidence about the economy, its latest policy statement dropped a phrase it had previously used that referred to “uncertainties” surrounding the economic outlook.
Persistently low inflation and steady if sluggish economic growth have led many Fed officials to rethink their view of the so-called “neutral rate.” This is the point at which the Fed’s key rate is believed to neither accelerate economic growth nor restrain it.
