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Fed slashes interest rates

Federal Reserve Chairman Jerome Powell (Credit: Bloomberg)

The Federal Reserve slashed its benchmark interest rate to near zero Sunday and said it would buy $700 billion in Treasury and mortgage-backed securities in an urgent response to the new coronavirus pandemic.

  • Be Smart: Think of what the Fed did over the weekend this way: It resurrected most of its aggressive, unconventional and extraordinary policies used to combat the global financial crisis. But this time, instead of doing so over about 16 months, from late 2007 through early 2009, it announced versions of them in a single weekend, NYTimes noted.
  • Dig Deeper: The coronavirus crisis has escalated sharply in recent days, with school closures and event cancellations cascading across the country. Companies sent workers home, and smaller businesses grappled with how to survive. Consumers, meanwhile, have stocked up for an uncertain period in which they are being asked to stay at home to combat the virus’s spread. 
  • Heard on the Street: Many Wall Street forecasters now expect the economy will fall into recession during the first half of the year, and the shape of the recovery could be determined largely by how local, state, and federal health officials mitigate the spread of the virus. Goldman Sachs on Sunday lowered its first-quarter GDP growth forecast to zero, and sees a 5% contraction in the second quarter, followed by a sharp snapback for the remainder of the year, CNBC reported.

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