The Federal Reserve, taking a second and more powerful emergency action to fight the coronavirus’ severe impact on markets and the economy, slashed interest rates on Sunday to near zero and said it would employ other steps to boost lending and support the financial system.
The Fed announced it would cut a full percentage point from its benchmark rate, taking it down to the same rock-bottom level wherit was pinned for several years because of the Great Recession. Officials said they also would buy at least $700 billion of Treasury and mortgage-backed securities to help maintain smooth functioning of financial markets.
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed’s monetary policy committee said in a statement. “The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.”
The Fed also announced moves aimed at boosting lending, including lowering the rate charged to banks for short-term emergency loans, and said it would encourage banks to lend to households and businesses affected by the coronavirus.
Fed policymakers made an emergency half-point rate cut about two weeks ago and were set to meet Tuesday and Wednesday for a regularly scheduled meeting, when analysts expected more action to be taken. But officials did not wait.