The Federal Reserve took yet another bold action on Sunday evening, announcing that the central bank would be slashing interest rates to zero percent. But the markets weren't impressed, with the Dow dropping over 2,000 points, and oil prices dropping as much as 10 percent.
In a surprise move by the Federal Reserve Sunday evening, the central bank announced that it will be cutting interest rates to zero percent and reactivating the crisis-era program of bond purchases known as "quantitative easing," in which the Fed buys billions of dollars in bonds to cut prices and keep markets flowing.
The move comes following another announcement last week stating that the Federal Reserve pledged to inject as much as $1.5 trillion into U.S. markets to cull the growing panic sparked by the Coronavirus pandemic.
Trump praised the Fed's action, stating “It makes me very happy, and I want to congratulate the Federal Reserve,” adding, “That’s really good news, that’s really great for our country. … I think people in the market should be very thrilled.”
Oil Can't Catch A Break
Despite the supposedly 'really good news,' oil markets failed to react positively. The price of WTI fell by 8 percent, and Brent dropped by as much as 10 percent following the announcement.
While the coronavirus continues to impact global stock markets, the oil industry is seemingly out against itself. It's abundently clear that the pandemic is impacting oil demand, yet instead of cooperating, the biggest oil nations on the planet are facing off in a price war. Related: Output In World's Largest Copper Mine Is Falling
Russia, for its part, bailed on the OPEC deal, and essentially told other producers to open the floodgates...
And Saudi Arabia responded in kind, suggesting that it was ready to saturate the market with even more oil.
Other OPEC producers joined the free-for-all, with the United Arab Emirates upping its output to 3 million barrels per day, and Iraq adding thousands of barrels to the mix, as well.
By Michael Kern for Oilprice.com
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