New York (CNN Business)The Federal Reserve launched a new program Tuesday that will seek to unfreeze a crucial market that gives American businesses access to short-term credit.
Analysts had warned the commercial paper market, which provides short-term funding for businesses, had frozen in recent days and urged the Fed to immediately step in.
“The commercial paper market has been under considerable strain in recent days as businesses and households face greater uncertainty in light of the coronavirus outbreak,” the Fed said in a statement.
The commercial paper facility and several other steps taken by the Fed are aimed at preventing a credit crisis that deepens the disruptions caused by the coronavirus outbreak. Major companies including airlines, hotels, cruise lines and oil drillers are all facing severe financial stress and require access to cash.
The Fed said that the new program will be backed by the Treasury Department, which is providing $10 billion of credit protection to the Fed from the exchange stabilization fund.
In a statement, Treasury Secretary Steven Mnuchin said the coronavirus has created “challenges” for the commercial paper market by “constraining access” to short-term credit. The new facility, Mnuchin said, “will help American businesses manage their finances through this challenging period.
This is on top of the Fed’s other recent emergency actions. The US central bank slashed interest rates by a full percentage point to zero on Sunday in a bid to restore confidence. The Fed is also dusting off its quantitative easing program from the 2008 crisis. The US central bank officially launched QE4 on Sunday by promising to buy $700 billion of bonds.
Original Article : HERE ;
from MetNews https://metnews.pw/fed-revives-2008-era-program-to-unfreeze-critical-borrowing-market/
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