Fed slashes rates to near zero
The Federal Reserve took emergency action Sunday and slashed its benchmark interest rate by a full percentage point to nearly zero to try to offset the economic impact of the coronavirus outbreak. In another move to boost growth, the central bank also said it would purchase $700 billion in Treasury and mortgage-backed securities to encourage lending.
The Fed said in a statement that the effects of the outbreak will weigh on economic activity in the near term and pose risks to the outlook. Policy makers said they will keep rates at nearly zero until they are confident the economy has weathered the storm, which a number of economists say could push the U.S. into recession.
“These are strong measures,” said Fed Chairman Jerome Powell in a news conference, warning that growth in the second quarter would be slow. “The virus will run its course and economic activity will resume. In the meantime, we will act to support the flow of credit to companies and individuals.”
The Fed also said that it was working with central banks around the world, including the European Central Bank, the Bank of Canada, the Bank of Japan and others, in a coordinated effort to make it easier for financial institutions to trade currencies and get U.S. dollars.