Noting that “the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Federal Reserve voted Sunday to lower the benchmark interest rate to 0 percent.
“The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook,” the Federal Reserve announced. “In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4 percent.”
The vote comes after the Fed had just made an emergency rate cut on March 3 to 1 percent to 1.25 percent and pumped $1.5 trillion into the bond market last week.
The Fed said it 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.” That includes boosting its bond holdings by $700 million in the coming months to help support the economy.
The National Association of Realtors praised the move, saying it is the same approach taken during the Great Recession.
“This is an all-out measure to prevent a recession and fight the fear that is blanketing the country,” said Lawrence Yun, the chief economist for the National Association of Realtors. “It is the right policy, since the policy can easily be reversed should a vaccine be discovered or the virus goes away.
In the emergency vote, the Federal Reserve board voted 9-1 for the cut. Loretta J. Mester voted no. She said she supported a cut but preferred a target range of one-half to three-quarters percent.
“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 Federal Reserve said in a news release. “This action will help support economic activity, strong labor market conditions, and inflation returning to the Committee’s symmetric 2 percent objective.”