The Fed said it will increase the cash it’s willing to lend into the market for so-called repurchase agreements.
The Federal Reserve is moving to stem investor panic over the spread of the coronavirus and to prevent the fallout from tumbling financial markets from slamming consumers, as a freefall in stocks forced the exchanges to halt trading.
Trading on the S&P 500 was temporarily suspended Monday morning after a 7 percent drop triggered one of the SEC’s market-wide “circuit breakers,” which stop trading for a specified period of time if prices drop by a certain magnitude.
In an effort to protect consumers, the Fed and other regulators are expected to urge banks to work with people who have mortgages, credit card debt and other loans and are facing the prospect of missing days or weeks of work as the virus spreads and businesses take countermeasures.
“It’s routine for the Fed to encourage financial institutions to meet the financial needs of their communities during past government shutdowns and natural disasters, and we are currently considering the best way to do so in this situation,” a spokesperson for the central bank said in a statement.
The New York Fed also announced Monday morning that it is expanding the amount of cash that it’s injecting into a central piece of the financial system where banks and other firms get short-term funding. The goal is to avoid an unwanted spike in interest rates that could then feed through to the broader economy.
The Fed said it will increase the cash it’s willing to lend into the market for so-called repurchase agreements, in which there is an temporary exchange of cash for high-quality collateral such as a government bond.
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The Fed said it will increase the cash it’s willing to lend into the market for so-called repurchase agreements https://t.co/XxwGOfVrx3
— POLITICO (@politico) March 9, 2020
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