The U.S. Federal Reserve was supposed to be out of ammunition after it cut its benchmark interest rate to near-zero last week. Market watchers and economists warned there wasn’t much else the central bank could do to stop a downturn so destructive it now has some pundits worrying about a depression.
On Monday, the Fed revealed it still had more than one bullet left in the chamber. The only problem is that none of them seems capable of helping markets find a bottom.
Monday’s moves, announced before markets opened, included the removal of a self-imposed US$700 billion cap on its quantitative easing plan, essentially licensing it to buy as much government debt as it feels is needed. The central bank also said that, for the first time, it would buy corporate bonds.
Each of the Fed’s emergency interest rate cuts have been met with deep selloffs — and the market