The Federal Reserve just pledged asset purchases with no limit to support markets

The Federal Reserve said Monday it will launch a barrage of programs aimed at helping markets function more efficiently amid the coronavirus crisis. Among the initiatives is a 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.”

That represents a potentially new chapter in the Fed’s “money printing” as it commits to keep expanding its balance sheet as necessary, rather than a commitment to a set amount. The Fed also will be moving for the first time into corporate bonds, purchasing the investment-grade securities in primary and secondary markets and through exchange-traded funds. The move comes in a space that has seen considerable turmoil since the crisis has intensified and market liquidity has been sapped.

Markets initially reacted positively to the moves but headed back lower in early trading, with the Dow Jones Industrial Average down 260 points. Other initiatives include an unspecified lending program for Main Street businesses and the Term Asset-Backed Loan Facility implemented during the financial crisis. There will be a program worth $300 billion “supporting the flow of credit” to employers consumers and businesses and two facilities set up to provide credit to large employers.

The Fed also said it will purchase agency commercial mortgage-backed securities as part of an expansion in its asset purchases, known in the market as quantitative easing. The move represents an expansion into the commercial sector of real estate for the central bank’s acquisitions.

The Fed announced it also is expanding its Commercial Paper Funding Facility. The program now will include “high-quality, tax-exempt commercial paper” and the pricing will be reduced. The central bank also said it will lower the interest rate on its repo operations to 0% from 0.1%. The operations are conducted daily to provide banks short-term funding.

The Federal Reserve just pledged asset purchases with no limit to support markets, CNBC, Mar 23