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Federal Reserve policymakers will begin a two-day meeting on Tuesday amid turbulent financial markets.
The Fed is needed to rescue an economy and job market that appear to be free-falling into the worst catastrophe since the Great Depression.
The data is dire. More than 26 million Americans have applied for unemployment benefits since the coronavirus forced widespread business closures. Retail sales have dropped by a record pace. Home sales have plunged.
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In the meantime, inflation has started to fall amid the collapse in economic activity and is sure to sink further below the Fed's 2 percent target level. With beleaguered hotels, airlines and retailers slashing prices, inflation could fall to 1 percent or less by year's end. That poses another problem for the Fed: Declining prices can eventually lead consumers to delay spending, thereby slowing the economy further.
In response, the Fed has slashed its benchmark interest rate to near zero in two emergency moves and launched an alphabet soup of lending programs — nine in total — to pump cash into financial markets.
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The central bank has also bought about $1.4 trillion in Treasury securities to ensure that banks can swap Treasurys for cash and keep rates low.
Chairman Jerome Powell isn't expected to announce any major new initiatives when the Fed's meeting ends Wednesday. The central bank may provide more details on its lending programs and may also fill in some specifics about its Treasury-buying program, which is now essentially unlimited.
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Economists will also look for any changes the Fed may make to where it stands on interest rates. At its meeting last month the Fed said it will keep rates at near zero “until it is confident that the economy has weathered recent events."
Two weeks ago, as part of a $2.3 trillion lending program, the Fed said it would, for the first time, buy municipal bonds issued by state and local governments, up to $500 billion. It also unveiled a Main Street Lending Program, which will also for the first time lend $600 billion to medium-sized companies of up 10,000 employees.
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The loans are intended to support mostly companies that are too large for the government's small business lending program, which targets those with fewer than 500 workers. Companies that borrow from the Main Street program must “make reasonable efforts” to retain their workers, the Fed says, and cannot repurchase their shares or pay dividends. The Fed has said it will disclose the recipients of its Main Street loans.
The Associated Press contributed to this article.
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