The US Federal Reserve, headed by Central Bank Governor Jerome Powell, has chosen to leave the interest rate zero. The interest rate will continue to range from 0% to 0.25%. At the same time, the bank said it was committed to continuing to intervene in the markets by buying bonds (monetary relief) as long as it believed credit in the US economy was in jeopardy.
According to the central bank’s statement, it is committed to purchasing bonds worth at least $ 120 billion a month in order to inject liquidity into the markets.
The bond purchases help the credit markets work more smoothly and set proper financial terms. They also ensure the flow of credit to households and businesses. The council, however, has not reassessed how long the bank will help buy the bonds.
Post-interest rate publications often cause sharp movements in the markets. The frenetic feeling that has characterized the markets in recent times, does not characterize the markets today when at the last trading hour they show a mixed trend with changes of up to 0.3%.
It is interesting to note that at the press conference, Powell provided an explanation of the Federal Reserve’s latest move to join an environmental convention. According to the governor, this is not the Bank’s desire to increase credit in the renewable energy sector, but more the Bank’s recognition that this is a problem that policymakers must take into account its risks.
The interest rate was last changed in March 2020 when the corona virus was still a terrible threat to the global health and economy. Bank Powell Governor, realizing that there is a clear danger to large industries in the US economy, which could degenerate into a credit crunch, decided to lower the interest rate by 50 basis points to zero.
The Fed receives many compliments for its conduct so far in the crisis. This is because the ten-year bond yield, which indicates inflation expectations, among other things, remained low. Even when the markets thundered and the Nasdaq, the S&P 500 and the Dow Jones set new records, the bond yield remained below 1 It can be said that the low yield indicates that the average investor did not think that the Fed would lose its temper and behave in an extreme way.
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