Coronavirus: US Federal Reserve pledges another $2.3 trillion in loans
The US Federal Reserve has promised an extra $2.3 trillion (£1.84 trillion) of loans to shore up the US economy as American unemployment surged for the third week in a row amid the coronavirus crisis.
Fed chairman Jay Powell said the money would be made available for employers and households to help them through the coronavirus pandemic.
“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” he said today.
Fed targets ‘vigorous’ US recovery
“The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
A further 6.6m US citizens registered as unemployed this week, data released today revealed. And the US revised up last week’s 6.6m figure to 6.87m.
The Fed will use the money as general relief for US households and employers “of all sizes”.
The $2.3 trillion of loans will also help state and local government deliver “critical services” during the coronavirus pandemic.
The Federal Reserve said it is using its “full range of authorities” to keep cash flowing through the US economy.
US coronavirus deaths spike
It comes after President Donald Trump extended the US coronavirus lockdown until the end of April. He had originally hoped to reopen the economy by Easter, but coronavirus deaths have continued to spike.
The US posted a record 1,800 coronavirus deaths yesterday, though Trump has expressed hope the country is approaching a peak.
“FLATTENING OF THE CURVE!” he tweeted yesterday.
Today the Fed said its $2.3 trillion cash flow injection would help small businesses keep workers on the payroll.
Fed aims to keep businesses liquid amid coronavirus crisis
And it would purchase up to $600bn in loans to keep credit flowing to small and medium businesses.
Businesses must employ up to 10,000 workers with revenues up to $2.5bn to qualify for one of the four-year loans.
The US Treasury would also use a coronavirus relief act to provide $75bn in equity to a business lending scheme.
Federal Reserve chair Powell said he would target households and businesses through capital markets. He will do so by underwriting $85bn of $850bn of market loans.
And the Fed will help provide state and local governments with cashflow by offering up to $500bn in lending.
US stock futures look higher on Fed stimulus
US stock futures knocked by the US jobless claims pushed higher on the Fed’s intervention.
The Dow Jones is set to open shortly 1.4 per cent higher. And the S&P 500 is due to increase 1.1 per cent. The tech-heavy Nasdaq will rise almost 0.9 per cent when it opens.
Neil Birrell, chief investment officer at Premier Miton Investors, said: “It’s hard to find any good news in the economic data at the moment, and it’s unsurprising the Federal Reserve is stepping up its liquidity measures in such a significant fashion.
“Equity markets have been really strong of late, and it feels like they have lost touch with the reality for now. Markets will get pulled to and from by the bad data and positive Fed action.”