The New York Fed will offer US$500 billion in three-month loans, called repurchase agreements or"repos" on Thursday and Friday, and US$500 billion in one-month repos on Friday. Then over the coming month, it will provide US$500 billion a week each of one- and three-month repos.
"This is a full-blown crisis response operation, intended to make it abundantly clear that the Fed will not allow liquidity to dry up," Ian Shepherdson, chief economist of Pantheon Macroeconomics, said in a note.The Fed uses the money market to keep the central bank's policy interest rate - the federal funds rate - in line with the desired range.
"We applaud the Fed's actions as they are necessary, but unfortunately... it is not sufficient," Kathy Bostjancic of Oxford Economics told AFP. But as those fears have been realized and more disruptions ripple across the country, impacting airlines, hotels, restaurants and Broadway, economists say policymakers could deliver an even larger rate cut March 18 following the bank's regularly scheduled two-day meeting, with some saying the level could be slashed to zero, where it was during the global financial crisis.