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U.S. Federal Reserve slashes rate to near 0 in effort to offset COVID-19 impact


The U.S. Federal Reserve took emergency action Sunday and slashed its benchmark interest rate by a full percentage point to nearly zero and announced it would purchase more Treasury securities to encourage lending to try to offset the impact of the coronavirus outbreak.

The central bank said the effects of the outbreak will weigh on economic activity in the near term and pose risks to the economic outlook and it will keep rates at nearly zero until it feels confident the economy has weathered recent events.

The Fed also said it will purchase $500 billion US of Treasury securities and $200 billion US of mortgage-backed securities to smooth over market disruptions that have made it hard for banks and large investors to sell Treasuries.

The disruptions bumped up the yield on the 10-year Treasury last week, an unusual move that threatens to push borrowing costs for mortgages and credit cards higher. The Fed also said it has dropped its requirements that banks hold cash reserves in another move to encourage lending.

More to come





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