On Sunday, March 15, the Federal Reserve made an unprecedented move by slashing its benchmark rate to zero and starting another round of quantitative easing. It also lowered its emergency. The markets did not react kindly to this news, but it’s important to understand why the Fed did it and what it means to you.
By taking these steps, the Fed aims to:
- Provide liquidity to businesses and banks by lowering their cost of borrowing and providing additional reliable capital
- Encourage lending to businesses who will be hurt by COVID-19 and by eliminating requirements that might keep banks from providing loans to people who didn’t previously meet them
The Fed is doing nearly everything in its power to ensure banks and businesses have easy access to money to keep them solvent. That being said, these moves might not have the same effect on small businesses as they do on larger companies with easier access to banks and lending vehicles.
The Small Business Administration is providing an option for people to apply for disaster loans to help with “fixed debts, payroll, accounts payable and other bills that cannot be paid because of the impact of COVID-19.” However, these are not guaranteed loans, and there are certain hurdles a state or county must meet for business owners to access this capital. To learn more, visit ok.gov/OEM.
We believe these are positive steps to help minimize the economic impact of COVID-19. We anticipate that the Federal government might also provide additional tax cuts or benefits to lessen the impact to end consumers and smooth the decline in financial markets. We’ll continue to monitor the markets and share relevant economic insights as they come to light. In the meantime, we hope you’ll join us in protecting our clients and employees by following some modified operations for how we do business.
Blog by Andrew Gaskill, Financial Services Manager
Category: Financial Service Team
