
Fed cuts main interest rate to near zero, to boost assets by $700B - ra7
https://www.bloomberg.com/news/articles/2020-03-15/fed-cuts-main-rate-to-near-zero-to-boost-assets-by-700-billion
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brenden2
This is an incredibly bearish signal. The Fed essentially turned its biggest
lever all the way, and there's little left in their toolbox. One can only
speculate as to why they're panicking like this, but my guess is that it's
largely political.

The next big thing would be for the Fed to start buying stocks directly,
probably through ETFs, which is something it currently can't do. At the moment
it can only buy mortgage backed securities and bonds.

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brianpgordon
The Fed's move to cut to zero has been expected by _everybody_ over the last
few sessions. This is not new information.

As for why they're doing this, well, monetary stimulus is really all the Fed
can do, ineffective as it is, and in the vacuum of fiscal intervention from
Washington I guess they feel that someone has to do something. By cutting all
the way to zero they also put the ball in the government's/congress's court so
the focus is on their inaction, where it should be.

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grandridge
As an emergency on a Sunday is a huge deal. It's a gigantic panic button that
was just pressed

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foota
Maybe they wanted time for it to settle in before markets open?

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RandomBacon
8 minutes older with more comments:
[https://news.ycombinator.com/item?id=22586743](https://news.ycombinator.com/item?id=22586743)

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mikedilger
Economic stimulus like this works if it incentivizes people to engage in more
economic activity. But it won't because of the virus. In fact I'd argue it is
immoral to tempt people into more economic activity right now, something which
is significantly at odds with what we all need to do to minimize transmission.
Insomuch as it affects the rates on existing loans and provides relief then
that's a good thing, but its not well targetted for that purpose.

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adaisadais
All of the sins from the results of ‘07-‘08 have brought us here. The
underlying economy is sick. The nCovid-19 is just helping to expose it.

Until we as a society accept r > g and we begin to take appropriate measures
things like this will become larger and larger instead of smaller. (1).

(1) [https://en.m.wikipedia.org/wiki/Capital_in_the_Twenty-
First_...](https://en.m.wikipedia.org/wiki/Capital_in_the_Twenty-
First_Century)

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voisin
The real economy should be pretty rate insensitive at this point. This is the
financial shenanigans of desperate policy makers.

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astronautjones
This is a terrible thing to do right now.

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Donald
There's a good chance we see negative interest rates in the US this year.

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oyebenny
How would that work?

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wcoenen
Same as in the EU where the ECB has a deposit rate of -0.5%. The deposits of
banks at the central bank (aka "reserves") shrink over time according to the
negative rate.

[https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...](https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html)

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foobarbazetc
Yeah... not a good sign.

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foobarbazetc
How’d that work out? Not well:

[https://twitter.com/business/status/1239314620675915776?s=21](https://twitter.com/business/status/1239314620675915776?s=21)

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josiahtu
Imagine if Trump had tried as hard to contain coronavirus as he’s trying to
pump markets rn

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tekkk
I don't really understand the economics of it all, but feels bit like throwing
gas the flames. The downturn is inevitable. Does this soften it a little bit,
I do not know.

If people just stop traveling and spending money like normally, as they are
currently everywhere in Europe, there isn't really anything you can do about
it. Which will sooner or later happen in US too, that's for sure. Doesn't
really matter how cheap the prices are. Unless a vaccine is developed in very
near-future, it's now just playing time before a large portion of population
will contract Covid-19.

