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Tuesday, 24 Mar 2020 02:00 pm

U.S. Federal Reserve aims 'bazooka' to backstop coronavirus-hit economy

“It’s their bazooka moment,” said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan.

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The U.S. Federal Reserve on Monday rolled out an extraordinary array of programs to backstop an economy reeling from sweeping restrictions on commerce that scientists say are needed to slow the coronavirus pandemic and ultimately keep more people safe.

For the first time, the Fed will back purchases of corporate bonds, backstop direct loans to companies and “soon” will roll out a program to get credit to small and medium-sized business. It also said it will expand its asset purchases by as much as needed to stabilize financial markets.

The series of actions mark a massive intervention by the U.S. central bank beyond the financial markets, where it has so far concentrated its firepower, into the real U.S. economy.

“It’s their bazooka moment,” said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan.

Nearly a third of the U.S. population has been urged to stay indoors as governors from California to New York mandate “social distancing” and the shutdown of non-essential businesses to slow the person-to-person spread of the virus.

With customers disappearing rapidly, businesses starved of cash may be able to tap into the Fed’s “lifeline” to stay afloat while the shutdowns continue, said University of Oregon economics professor Tim Duy.

“The Fed is still working to maintain the flow of credit because they know what happened during the Depression (when) too many firms went under,” Duy said. “The more damage that happens, the harder it is going to be to restart the economy.”

Still, he said, without massive fiscal aid such efforts won’t be enough to stem the tide of what economists polled by Reuters estimate could be a million jobless claims logged across the nation inside of a week, with more to come.

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Tags Bazooka moment United States Federal Reserve Economy Coronavirus Pandemic Financial markets

Neha Pandey

Aware of her elements, Neha writes the best articles across industries including electronics & semiconductors, automotive & transportation and food & beverages. Being from the finance background she has the ability to understand the dynamics of every industry and analyze the news updates to form insightful articles. Neha is an energetic person interested in music, travel, and entertainment. Since past 5 years, she written extensively on sectors like technology, finance and healthcare.


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