Fed takes major action to support markets as coronavirus weighs on economy

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Bitcoin is on the rise along with the Dow Jones Futures following the Federal Reserve's commitment to continue its asset purchasing program "in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy".

The unusual timing of the Fed announcement came just ahead of the open of a new week of trading on the roiling USA markets, where stocks have sustained huge losses this month as the deadly pandemic spreads across the globe and deepens concerns across the United States.

The Federal Reserve also promised to unveil a direct lending programme for small and medium-sized American businesses, which are expected to be hardest hit by the outbreak.

After already aggressively easing monetary policy this month, including sending interest rates to near zero, the US central bank said it would now lend against student loans and credit card loans as well as buy bonds of larger employers.

Saying "aggressive efforts" must be taken to "limit the losses to jobs and incomes", the Fed's Open Market Committee set no limits in its new move to buy Treasury bonds and mortgage-backed securities.

It will be backed by US$30 billion from the Treasury's Exchange Stabilization Fund.

The Fed also said it would launch three new lending facilities, including the Term Asset-Backed Securities Lending Facility, a program first created during the 2008 financial crisis.

The Fed has been taking a series of emergency steps over the past weeks, including an emergency rate-cut to near zero, to calm financial markets that have remained volatile amid increasing uncertainty over the prospects of the global economy.

This means that the U.S. central bank's asset buying program will go beyond the amounts it pledged to purchase on March 15. "Don't ask how much they will buy, this is truly [quantitative easing] infinity".

The Fed is also reducing the pricing of its Commercial Paper Funding Facility, and expanding it to include high-quality, tax-exempt commercial paper as eligible securities. "They are throwing everything in the kitchen sink", said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. "We need to be creative and collaborative with our colleagues in the administration, and Congress to come up with solutions".

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