The U.S. Federal Reserve on Monday mounted an extraordinary new array of programs to offset the "severe disruptions" to the economy caused by the coronarvirus outbreak, backstopping an unprecedented range of credit for households, small businesses and major employers.
The new programs mean the Fed will lend against student loans, credit card loans, and U.S. government backed-loans to small businesses, and buy bonds of larger employers and make loans to them in what amounts to four years of bridge financing. A new "Main Street Business Lending Program" that will extend credit to small- and-medium sized businesses will also be announced "soon," the Fed said.
Existing purchases of U.S. Treasury and mortgage-backed securities will be expanded as much as needed "to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy."
"It's their bazooka moment," said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan. "It's their we'll do whatever it takes moment which should be a sign to financial markets and investors that the Fed will provide any and all liquidity necessary to support the economy through this period."
Stock futures rose, reversing earlier losses, and U.S. Treasury yields also ticked higher.
The move also helped lower risk premiums in key corporate credit markets that have been disrupted in the outbreak, analysts said.
In a statement the Fed said the effort, approved unanimously by members of the Federal Open Market Committee, was taken because "it has become clear that our economy will face severe disruptions" as a result of the health crisis.
Nearly a third of the U.S. population is subject to new rules that close non-essential businesses and discourage people from leaving their homes in order to slow the spread of the virus.