Fed: Lender of last resort to the economy – BMO

The Fed´s traditional role as “lender of last resort” to the banking system is fast becoming one of lender of last resort to the economy, according to economists at BMO Capital Markets.

Key quotes

“The Fed said ‘the coronavirus pandemic is causing tremendous hardship across the United States and around the world’. ‘Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate’.”

“The Fed wants to make sure that the expected economic contraction in March and Q2 is not made worse because the credit creation process and credit markets became dysfunctional, and also to ensure that a robust recovery is likely once the COVID-19 crisis subsides.”