Unlimited open bar of liquidity. Jerome Powell disguised himself this Wednesday as 'Buzz Lightyear', the famous doll from 'Toy Story', and promised the markets unlimited purchases of assets and 0% rates for several years, at least until the end of 2022.
And with this panorama, the Nasdaq it marked a new historical maximum over 10,000 points. Investors continue to buy equities, especially from technology sector, while the US central bank promises that it will do whatever is necessary to curb the effects of the pandemic.
Powell defended the unlimited stimuli from the central bank over the unprecedented uncertainty caused by the coronavirus, against those who criticize that the Fed is causing a bubble on Wall Street with its unlimited stimuli.
"We want markets to work; we are not looking for a particular level. If we had to stop because we think asset prices are too high,what would happen to those people that we're supposed to be serving? "he asked at a press conference.
"We don't even think about raising rates. We haven't even considered it"Powell replied to another question." The messages from the Fed favor risky assets, "he says. Edward Moya, analyst at Oanda. "The Fed is determined to maintain adequate liquidity in the system and is ready to do whatever it takes"adds Naeem Aslam, Ava Trade expert.
The New York Federal Reserve specified that Fed purchases will be $ 80 billion a month for purchases of Treasury bonds and others 40,000 million in mortgage-backed securities. Total, $ 120 billion a month.
Another very relevant message released by Powell was that the Fed discusses the possibility of controlling the bond yield curve and that it will continue to do so in future meetings. It was a way to prepare the markets for a future announcement in this regard.
The monetary body don't want to lose control over debt after the yield on the 10-year US Treasury bond has rebounded in recent days. However, his message caused a 10-year bond yield drop to 0.72%.
In closing, Powell wanted to launch a committed but at the same time optimistic message. "I see a full recovery in the long term, with strong job creation in the coming months, not an economic depression", he affirmed in spite of the complicated thing to do forecasts.
And promised that "We will continue to be aggressive until the crisis passes and confidence returnsDisguised as 'Buzz Lightyear', Powell will go 'to infinity and beyond' and did not hesitate for a moment to do whatever it takes to contain this crisis.