WASHINGON (AP) — The Federal Reserve taking emergency steps to shore up the economy against the coronavirus by aggressively reducing its benchmark interest rate nearly to zero on Sunday. The Fed also says it will buy $700 billion in bonds.
In a telephone conference call with reporters, Federal Reserve chair Jerome Powell says the key interest rate had been cut by a full percentage point to a range between zero and 0.25%.
Today, we reduced the target range for our policy interest rate by one percentage point, bringing it close to zero and said that we expect to maintain the rate at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals.
— Jerome Powell, U.S. Federal Reserve chair
This massive emergency action should keep financial markets functioning and lending flowing to businesses and consumers affected by the coronavirus pandemic.
Powell also says the Fed would buy at least $500 billion in Treasury securities and $200 billion in mortgage-backed securities to ease market disruptions and keep longer-term borrowing rates down.
The surprise announcement highlights growing concerns that the viral outbreak will likely cause a recession in the coming months. The Fed is uniquely poised to take action to counter potential risks.