The Congressional Research Service ("CRS") reviewed measures taken by the Federal Reserve Board ("FRB") to stimulate economic activity and inject liquidity into the U.S. financial markets.
In a report titled "Federal Reserve: Recent Actions in Response to COVID-19," the CRS described several FRB actions, including:
reducing the federal funds rate to the zero lower bound (zero to one-quarter percent) for the first time since the 2008 financial crisis - the FRB expects to maintain the short-term rate at zero "until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals";
reducing the cost of existing temporary U.S. dollar liquidity arrangements (a/k/a "swap lines") and extending additional swap lines to fourteen foreign central banks (see previous coverage);
reducing reserve requirements for banks to zero for the first time ever, reasoning that "because bank reserves are currently so abundant, reserve requirements 'do not play a significant role' in monetary policy";
providing up to $300 billion in financing through new programs intended to support the flow of credit to employers, consumers, and businesses;
establishing the Primary Dealer Credit Facility, an overnight offering and term funding designed to smooth market functioning (see previous coverage);
offering larger, longer-term repurchase agreements to primary dealers;
supporting the flow of credit to municipalities by expanding (i) the Money Market Mutual Fund Liquidity Facility (see previous coverage) by including a wider range of securities, and (ii) the Commercial Paper Funding Facility (see previous coverage) by making high-quality, tax-exempt commercial paper an eligible security;
purchasing Treasury and agency mortgage-backed securities in accordance with the amounts needed to facilitate (i) "smooth market functioning" and (ii) broader transmission of monetary policy throughout various sectors of the economy;
providing credit to large employers by establishing (i) the Primary Market Corporate Credit Facility to provide new bond and loan issuance, and (ii) the Secondary Market Corporate Credit Facility to provide liquidity for outstanding corporate bonds; and
establishing the Term Asset-Backed Securities Loan Facility to (i) increase the availability of credit to consumers and businesses, and (ii) enable the issuance of asset-backed securities backed by loans, such as student loans, auto loans, or Small Business Administration loans.
The Federal Reserve Board established temporary U.S. dollar liquidity arrangements with several other central banks to "help lessen strains in global U.S. dollar funding markets."
The Federal Reserve Board established an overnight offering and term funding following an announcement that it will establish a Primary Dealer Credit Facility designed to smooth market functioning.
The Federal Reserve Board established a Money Market Mutual Fund Liquidity Facility to address instability within the financial system as a result of COVID-19.
The Federal Reserve Board established a Commercial Paper Funding Facility "to support the flow of credit to households and businesses due to the coronavirus outbreak."