Here are some facts that many of you may have known but may not have seen them put together in such a format. The Fed rolled out their big guns (more like Bazookas) in March to fight the War on Covid19. They made it very clear – to the country and world – they will do ANYTHING to support the global financial markets. The Fed is providing an unprecedented level of liquidity through several channels. The Fed made 2 Emergency Interest Rate cuts to Fed Funds in March: one on March 3 cutting rates by 0.5%, and another on March 15 cutting rates by an additional 1.0%. In a statement, the Fed said they will keep Interest Rates low until they are: “confident that the Economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” The next FOMC Meeting is scheduled for April 28 and 29.
The Fed knows it can’t prevent an Economic downturn, but aggressive Monetary Policy can soften the blow and hasten a recovery. Along with Interest Rate cuts, the Fed announced a litany of additional emergency actions aimed at pumping massive amounts of liquidity into Banks and the Financial Markets. Some of the other actions are:
- Expanding the Fed’s Balance Sheet by buying $500B of Treasury Securities and $200B of MBS – plus reinvesting payments from Treasury Debt and MBS into purchasing more Treasury and MBS Securities
- Encouraged Bank and Depository Institutions to use the Discount Window to meet credit demands
- Lowered the Discount Rate by 1.5% to 0.25% and extended Discount Window borrowing up to 90 days, pre-payable and renewable on a daily basis
Encouraged Banks to use the Fed’s Intraday Credit on a collateralized and uncollateralized basis.
Re- posted with permission from UHM – MBS Huddle Matthew Graham | 4/2 7:02 PM
What does all of this mean to you, the average, everyday, normal interest rate shopper that happened upon the ABBA First Mortgage website and read the NEWS section and is questioning what’s it all about? I can only say that we are living in unprecedented times and although we may not know what the future holds, we can safely assume that there are many pieces of the puzzle that are being jostled about trying to find out how we, as an industry, can find a way to make our economy whole once again. My hope and prayer is that the answer my friend is found soon, before we find ourselves holding each other accountable for each and every negative issue that we face. That could become ugly.