The Federal Reserve announced March 15, a Sunday, that it would cut interest rates to near zero. It was the Fed’s second rate cut in less than two weeks as the central bank attempts to stabilize financial markets as the coronavirus reshapes the very fabric of American life.
Additionally, the Fed said it would restart its program dubbed as “quantitative easing,” where the central bank buys billions of dollars in government and mortgage-related bonds.
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 set on March 3.
Chair Powell admitted the coronavirus presented “significant economic challenges.” The announcement came as major U.S. cities closed bars and restaurants, a number of states closed public schools, and the federal government told employees to forgo non-essential travel, all efforts to curb the spread of the coronavirus, which some experts warn could overwhelm the U.S. healthcare system.
“The rapidly evolving situation has led to high volatility in the financial markets,” Chair Powell said. The Dow was expected to continue to shed value when it opened March 16.
“The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy,” said the Fed in a statement.
President Trump said he was “very happy” with the Fed’s decision.