WASHINGTON — The Federal Reserve slashed interest rates to near-zero and unveiled a sweeping set of programs — including plans to snap up huge amounts of government and mortgage-backed debt — in an effort backstop the United States economy as the spread of coronavirus poses a dire threat to economic growth.
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the central bank said in a statement on Sunday. “The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses.”
Besides cutting its key interest rate by a full percentage point, returning it to a range of 0 to 0.25 percent, the Fed said that it would increase its holdings of Treasury securities by at least $500 billion and its holdings of government mortgage-backed securities by at least $200 billion “over coming months.”
“The committee will continue to closely monitor market conditions and is prepared to adjust its plans as appropriate,” it said.
The Fed also encouraged banks to use its discount window, which provides ready access to financing, and said it was “encouraging banks to use their capital and liquidity buffers as they lend to households and businesses.” The Fed also eliminated bank reserve requirements — a suite of efforts meant to free up cash for the banks to keep lending.
This is a developing story. Check back for updates.