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30.06.2020 09:43 AM
The Fed launches new aid programs for the US economy

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On Monday, the Fed launched its long-awaited program which allows people to buy corporate bonds directly from companies. It also introduced a new program created to stabilize financial markets in the face of volatility.

According to the Fed, the new program will allow the central bank to provide support to corporate clients in the primary market. Lending money to companies in need will help them raise their capital to keep their businesses afloat amid the current crisis.

President of San Francisco Fed Mary Daly, told reporters on Monday that it is "too early" to judge the strength of the US economy which opened after prolonged outages.

"The prospects for recovery depend as much as possible on whether quarantine is imposed again or if the existing measures are enough to allow people to return to their jobs," Daly said.

"As long as the United States has a high number of unemployed, the economy will recover slowly," she added.

The latest data on the US labor market will be published on Thursday this week. Economists surveyed by Reuters suggest that the unemployment rate will drop to 12.3% from 13.3% in May.

According to Daly, lay-offs will be much more alarming and will lead to even greater unemployment.

As for Europe, the Finance Minister of Germany as well as lawmakers ruled out that the European Central Bank (ECB) has implemented a needed aid program, which put an end to the conflict that threatens to undermine central bank policies.

Recall that last month, the Constitutional Court of Germany gave the ECB three months to justify its bond purchase program or else the German Central Bank will pull out its cooperation from the program.

Since the Bundesbank is the largest bank out of the 19 national central banks in the eurozone, as well as the main shareholder of the ECB, halting its cooperation will raise questions about the future of the European currency in Germany.

"The impression of a weak cohesion of the Eurosystem can greatly undermine markets and create a backlash that will undermine the program," ECB officials told politicians before a decision was made.

In a draft document, officials came to the conclusion that the ECB has complied with the requirements asked by the German court.

Andrey Shevchenko,
Analytical expert of InstaForex
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