The Federal Reserve will continue to buy bonds for the time being and will continue to support the US economy hit by the corona crisis. But according to the US substitute of Central Bank, there is currently no need to further cut the already low interest rates in the United States.
As a result, the Fed’s main interest rate remains between 0 and 0.25 percent. In March, the bandwidth for the rate was reduced two more times. In the new interest rate decision, the Fed repeated its previous comments that it wants to keep interest rates close to zero..
until fully certain that the economy has weathered recent events and is on track to achieve its maximum employment and price stability targets.
Central bankers view the COVID-19 pandemic as a major risk for the medium-term outlook. Fed chief Jerome Powell pointed out in an explanation that the virus has brought the economy to a sudden halt and it is uncertain how long this state will last and how will it finally resolve. He fears an unprecedented sharp decline in economic activity in the country in the second quarter. Additional support measures may therefore be needed, but Powell did not want to speculate on details on Wednesday.
Experienced stock brokers did not expect the Fed to change interest rates in the run-up to the interest rate decision. Hence, the New York stock exchanges were not shocked by the message from Powell and his colleagues. Sentiment on Wall Street was supported in particular by a hopeful message about the investigation of a potentially effective corona virus cure.
It became clear earlier today that the continued growth of the US economy has come to a sudden end. According to government estimates, the gross domestic product (GDP) fell by 4.8 percent in the first quarter. This was the strongest contraction since the outbreak of the financial crisis in 2008.
The US stock markets closed on Wednesday with solid gains. The sentiment was supported by a hopeful message about the investigation into a potential corona virus drug. Investors also responded to a large flow of operating results and new figures for the US economy. The Dow-Jones index ended 2.2 percent higher at 24,633.86 points. The broad-based S&P 500 gained 2.7 percent to 2,939.51 points and tech exchange Nasdaq gained 3.6 percent at 8,914.71 points.
An experimental corona drug from pharmaceutical Gilead Sciences helped corona patients recover faster than normal care in a trial. According to the US National Institute of Allergy and Infectious Diseases (NIAID), which conducted the study, it is “pretty good news.” There are also rumours that supervisors want to allow the drug for large-scale use as an emergency intervention. On the stock market, Gilead’s stock grew almost 6 percent.
Oil prices recovered after the recent severe price falls. A barrel of American oil cost nearly a quarter more at $ 15.37. Brent oil grew over 11 percent to $ 22.74 per barrel. The euro was worth $ 1.0870, compared to $ 1.0851 when the European stock markets closed earlier today.