Fed slashes interest rates to zero as part of wide-ranging emergency intervention

The Federal Reserve took the most dramatic steps since the 2008 financial crisis to bolster the U.S. economy in the face of the coronavirus

di Heather Long

The Federal Reserve announced on Sunday it would drop interest rates to zero and buy at least $700 billion in government and mortgage-related bonds as part of a wide-ranging emergency action to protect the economy from the impact of the coronavirus outbreak.
The moves, the most dramatic by the U.S. central bank since the 2008 financial crisis, are aimed at keeping financial markets stable and making borrowing costs as low as possible as businesses around the country close and the U.S. economy hurtles toward recession.

The Fed, led by Chair Jerome H. Powell, effectively cut its benchmark by a full percentage point to zero. The benchmark U.S. interest rate is now in a range of 0 to 0.25 percent, down from a range of 1 to 1.25 percent.

In addition to rate cuts, the Fed announced it is restarting the crisis-era program of bond purchases known as “quantitative easing,” in which the central bank buys hundreds of billions of dollars in bonds to further push down rates and keep markets flowing freely. The Fed is also giving more-generous loans to banks around the country so they can turn around and offer loans to small businesses and families in need of a lifeline.

“Economic policy experts must do what we can to ease hardship caused by the disruption to the economy,” Powell said in a 42-minute conference call Sunday evening. “We are prepared to use our full range of tools to support the flow of credit to households and businesses.”

Powell said Fed leaders met Sunday afternoon because they anticipate a “significant effect” on the U.S. economy in the coming months, including negative growth in the second quarter. Their goal is to do all they can to help the nation “weather this difficult period” and “foster a more vigorous return to normal once the disruptions from the coronavirus abate,” he added.

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