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Fed Cuts Rates 1%

The currency markets were rocked by two fresh easing announcements on Monday.

In a dramatic, unscheduled move, the Fed eased its headline funding rate by a full 1%. It also announced that it will extend its asset purchase program by $700 billion. With this latest cut, the Fed has now eased its policy rate by 1.5% this month. Rates now stand at lows of 0%.

Given that the Fed is due for its March FOMC meeting this week, a further unscheduled move highlights the severity with which it is viewing the current economic situation. Traders will now be looking to the Fed statement and press conference on Wednesday for a deeper insight into the bank’s view on the situation.

The unexpected Fed rate cuts are eerily similar to the way it was operating during the Global Financial Crisis in 2007 – 2009. However, this time around, the Fed is acting even more aggressively by slashing rates sooner.

This suggests that either the Fed has learned from its previous approach, or that ...

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