In response to the epidemic, the Federal Reserve lowered its interest rate range by 0%-0.25%

　　Following an emergency interest rate cut of 50 basis points on March 3, the Open Market Committee (FOMC) of the Federal Reserve made an emergency decision on March 15, lowering the US benchmark interest rate by another 100 basis points, and at the same time announcing the purchase of US$ 700 billion in treasury bonds and mortgage bonds, and restarting quantitative easing measures. This is also the second time that the Federal Reserve has taken emergency interest rate reduction measures during the two meetings since the interest rate meeting in January to deal with the COVID-19 epidemic. Federal Reserve Chairman Powell said that this decision to cut interest rates will support the US economy and bring the market back to normal.

　　According to the announcement of the Federal Reserve meeting, the COVID-19 virus will affect the economic activities of the United States in the short term and pose risks to the economic prospects. In view of this development, the Committee decided to reduce the target range of the federal funds rate to 0% to 0.25%. The Committee hopes to maintain this target range and believes that this will help support economic activities. This is also the first time that the federal funds rate has been lowered to this ultra-low level since the international financial crisis in 2008.

　　The Fed said that it will continue to monitor information related to public health, global development and inflationary pressures, and will use policy tools to take appropriate actions to support the economy.

　　The Federal Reserve announced that it is ready to use all its tools to meet the credit needs of households and enterprises, thus promoting full employment and price stability. In order to ensure the smooth operation of the national debt which is vital to liquidity and the mortgage backed securities market, the Federal Reserve will increase its national debt holdings by at least $500 billion and mortgage backed securities by at least $200 billion in the next few months. The Fed will also reinvest its institutional debt and all the principal of mortgage backed securities in institutional mortgage-backed securities. In addition, the Fed will expand its overnight and regular repo business, continue to closely monitor market conditions, and prepare to adjust its plans appropriately.

　　In addition to the above measures, the Fed also announced arrangements with discount window, intraday credit, bank capital, liquidity buffer and reserve requirements.

　　At the same time, the Federal Reserve announced coordinated actions with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank to increase liquidity through the dollar liquidity swap arrangement. These central banks have agreed to reduce the price of long-term dollar liquidity swap arrangements by 25 basis points. In order to improve the effectiveness of swap arrangements in providing liquidity, foreign central banks also agreed to provide regular operations to support the smooth operation of the US dollar financing market.

　　Some Wall Street investors predict that the US economy will fall into recession in the first half of this year, and the degree of recovery depends on how state and federal health officials reduce the risk of virus transmission. Otherwise, this public health crisis may turn into a financial crisis.

　　The US Treasury bond market is considered to be the most liquid bond market in the world. The fierce market turmoil prompted the Federal Reserve to take some unusual actions last week to ease the pressure on the Treasury bond market.

　　Previously, the Fed decided to provide nearly unlimited short-term loans to 24 large banks (major dealers), which acted as the counterparty of the Fed when trading in financial markets. Powell said: "The national debt and mortgage bond markets are part of the foundation of the global financial system. If they are not functioning properly, the problems will spread to other markets." Therefore, the Fed has taken a bolder approach.

　　It is worth noting that after the Federal Reserve announced an emergency interest rate cut of 50 basis points on March 3, US stocks fell instead of rising, highlighting that the market’s worries about the economic outlook have not been alleviated by the Fed’s interest rate cut. After the announcement of this news, although the Federal Reserve was praised by President Trump, it once again triggered the fuse of US stock futures.