–What happened?
On March 18, 2009, the Federal Reserve Bank said it would pump more than $ 1 trillion into the US economy by buying bonds for the first time since the 1960s.
Where the market was
The S&P 500 closed the day higher at 794.35 and the Dow Jones Industrial Average closed at 7,486.58.
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What else was going on in the world
Brazilian soccer star Neymar made his professional debut for Santos and the swine flu outbreak was imminent in the US.
The Fed is increasing its stake
In March 2009, the US Federal Reserve had already cut interest rates to almost zero. But the nation’s severe recession, rising unemployment, falling real estate wealth, and declining exports justified more drastic measures.
“In these circumstances, the Federal Reserve will use all available instruments to promote economic recovery and maintain price stability,” the central bank announced.
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Given the weak economic outlook and the risk of damaging inflation, it agreed to purchase $ 300 billion in long-term government bonds and $ 750 billion in mortgage-backed securities over the next six months. The package plan came about as a compromise between members who advocated separate purchases of government bonds and mortgage securities.
“Both could support expanded buying across a range of assets, and several members noted that it would be appropriate to work across a range of assets and instruments when the effects of a single tactic were uncertain,” the Fed stated in its minutes.
The relief should lower mortgage rates and improve the flow of credit. In the short term, it catalyzed a rise in the S&P 500, a rise in bond prices, a steep fall in Treasury yields, and a fall in the dollar.
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