Question

Summarize the action(s) taken by the FOMC as per its Press Release and the Decisions Regarding Monetary Policy Implementation on March 15th, 2020.

Answer 1

Actions taken by the FOMC as per its press release and Decision regarding Monetary Policy Implementation on March 15th, 2020 are summarized in below points.

1.Federal Reserve has reduced policy interest rate by 1 percentage point, bringing it close to zero, and expect to maintain the rate at this level until it is confident that the economy has weathered recent events and is on track to achieve maximum employment and price stability goals.

2.The unemployment rate was 3.5 percent in February and has been at or near half-century lows for almost two years. Job gains have been running at a solid pace, well above what is needed to provide jobs for new entrants into the labor market.

3.Inflation, which has continued to run below symmetric 2 percent objective, will likely be held down this year by the effects of the corono virus outbreak.

4. Fed will purchase at least $500 billion of Treasury securities over coming months.

5. Fed will also purchase at least $200 billion of agency mortgage-backed securities over coming months and immediately cease the runoff of these securities in their portfolio. While the primary purpose of these securities purchases is to restore smooth market functioning so that credit can continue to flow.

6. Fed reduced the interest rate on discount window loans by 1-1/2 percentage points, bringing that rate to 1/4 percent. The discount window plays an important role in supporting liquidity and stability in the banking system, and encourage banks to turn to the discount window to help meet demands for credit from households and businesses.

7. To make the discount window more effective, it will also offer discount window loans for periods up to 90 days.

8. Fed has allowed to banks for eliminating reserve requirements and encouraging banks to make use of intraday credit with the Federal Reserve and to use their capital and liquidity buffers as they support lending to households and businesses.

9. the second quarter is probably going to be weak . In the view of many, output declining, output lower in the second quarter than it was in the first quarter.It's very hard to say how big the effects will be or how long they will last. It will be depend on how widely the virus spreads.