The Federal Reserve took emergency action Sunday and slashed its benchmark interest rate by a full percentage point to nearly zero and announced it would purchase more Treasury securities to encourage lending to try to offset the impact of the coronavirus outbreak.
The central bank said the effects of the outbreak will weigh on economic activity in the near term and pose risks to the economic outlook. The central bank said it will keep rates at nearly zero until it feels confident the economy has weathered recent events.
In a statement, the central bank said it was cutting rates to a target range of 0% to 0.25%.
"The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range," the Fed said in a statement.
"The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals," the Fed said.
The Fed already cut interest rates by half a percentage point on March 3 at an emergency meeting, the first rate cut outside of a regularly scheduled policy meeting since the financial crisis in 2008.
Policymakers were not due to hold their next interest-rate setting meeting until March 17-18.
On Saturday, U.S. President Donald Trump reiterated his frequent demand that the Fed “get on board and do what they should do," reflecting his argument that benchmark U.S. rates should be as low as they are in Europe and Japan, where they're now negative. Negative rates are generally seen as a sign of economic distress, and there's little evidence that they help stimulate growth.
With the virus depressing travel, spending, and corporate investment and forcing the cancellation of sports leagues, business conferences, music performances, and Broadway shows, economists increasingly expect the economy to shrink for at least one or two quarters. A six-month contraction would meet an informal definition of a recession.
