The central bank in America has taken drastic steps in its efforts to boost the mortgage markets and the US economy.
In place of a base interest rate, the Federal Reserve has replaced this for the first time in 75 years with a range. The range runs from 0 – 0.25 per cent, much lower than the previous target interest rate of 1 per cent, which is the lowest it has been since the Fed first started publishing its target rates back in 1990.
It is also offering to extend purchases of mortgage-backed securities, extend credit to small companies and households and considering buying US gilts in the New Year.
“The Fed is sending a message that it will print money to an unlimited extent until it starts to see the economy expanding,” William Poole, former St Louis Fed president, told Bloomberg News.
The majority of commentators applauded the move. “It’s a highly unorthodox and creative step. But we think it’s the best possible move for the U.S. consumer and for the financial market,’ said Michael Woolfolk at Bank of New York Mellon.