The United States is now dealing with one of the most abrupt halts in economic activity in history. “The problem is everyone in America is cutting back their consumption,” Jason Furman, who led the Council of Economic Advisers during the Obama administration, told Washington Post. “A lot of sectors are being hit, especially the services sector. A lot of income and spending is being reduced. That’s just an enormous shock to the economy.” Unlike the Great Recession, this downturn is the result of a completely external factor, meaning that it is possible this downturn will be much shorter and shallower, according to Louise Sheiner, Economic Studies Policy Director, The Hutchins Center on Fiscal and Monetary Policy. “It is worth remembering that in the early days of the housing market downturn, many of us thought that the problems would be limited to the subprime market and wouldn’t be macroeconomically important. We were very wrong,” she notes. Additionally, the Fed announced that over the coming months that it will increase its holdings of Treasury securities by at least $500 billion and its holdings and agency mortgage-backed securities by at least $200 billion. "The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals," said the Fed in a statement. Odeta Kushi, Deputy Chief Economist at First American, said the Fed's actions should help bolster the residential market and keep rates low. “This echoes 2008 when the Fed’s MBS buying spree increased demand at a time when investor demand was faltering. This, in turn, helped push rates for home loans down, enabling homeowners to lower monthly payments and encouraging investment in housing," she said.
Source: DS News