Interest rate cuts won't cure the coronavirus but investors are still hopin...
NEW YORK - Interest rate cuts won’t cure the coronavirus but investors are still hoping the Federal Reserve can take some actions to help soothe the roiled stock market.
The U.S. central bank also may announce measures to ensure sufficient liquidity and lending or to purchase assets by restarting the quantitative easing that the Fed employed during the financial crisis. Indeed, stocks briefly pared losses on Thursday after the New York Fed said on it will introduce $1.5 trillion in new repo operations this week and start purchasing a range of maturities as part of its monthly Treasury purchases. But the rebound was short lived and the S&P 500 ended down 9.5% on the day.
“Central banks must bolster confidence that they are willing to test the limits of where they view the effective bound on rates,” JPMorgan Chase economists said in a note this week. Of course, rate cuts may not help equities. The S&P 500 ended up falling 2.8% on March 3 despite the Fed’s surprise half-percentage point cut, which boosted sentiment but also led investors to speculate on what other actions the Fed could take.
“Should the Fed gauge that reducing rates is not providing for easier financial conditions, we expect it to quickly turn to quantitative easing,” Morgan Stanley economists said in a note.
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