Tables sit empty at a restaurant on San Francisco’s popular Pier 39 tourist destination on March 12, 2020 in San Francisco, California.
Justin Sullivan/Getty Images
The Federal Reserve has taken the most dramatic, far-reaching measures to try to support the economy since the 2008 financial crisis. On Sunday, the central bank slashed interest rates to near-zero as it restarted a massive program of bond purchases known as quantitative easing as part of a sweeping program to try to cushion the inevitable blow that coronavirus will have on the U.S. economy as a whole. The Fed cut its benchmark interest rate by a full percentage point Sunday, bringing it down to a range of 0 to 0.25 percent and said that over the “coming months” it would increase its holdings of Treasury securities by at least $500 billion and of government mortgage-backed securities by at least $200 billion.
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Federal Reserve 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.” The low interest rates are likely to stay in place until the economy can recover from the downturn sparked by the coronavirus. The Fed “expects to maintain this target range until it is confident that the economy has weathered recent events.”
The Fed is also calling on banks to use the trillions of dollars they have as cash buffer that were imposed after the 2008 financial crisis to help out businesses and individuals who have seen their lives turn upside down because of the virus. It also said it was dropping the cash requirement for banks so that they can have more money to lend out to customers. “The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals,” the central bank said. The Fed also took action with other major foreign central banks that effectively will make sure there are enough U.S. dollars available around the world.
President Donald Trump was quick to praise the Fed for its action. “It makes me very happy and I want to congratulate the Federal Reserve,” he said. “That’s a big step and I’m very happy they did it.”
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