The Federal Reserve Open Market Committee slashed interest rates Sunday in response to the mounting economic threat posed by COVID-19.
Because the coronavirus will "weigh on economic activity in the near term and pose risks to the economic outlook," the committee lowered the target range for the federal funds rate to zero to 0.25%, from a range of 1% to 1.25% it set March 3, the committee said in a statement.
"Families, businesses, schools, organizations, and governments at all levels are taking steps to protect people's health," Fed Chairman Jerome Powell said during a news conference Sunday. "These measures, which are essential for containing the outbreak, will nonetheless understandably take a toll on economic activity in the near term."
Mr. Powell added that economic policymakers must "do what we can to ease hardship caused by the disruptions to the economy and to support a swift return to normal once they have passed."
The Fed also announced $700 billion target for purchases of U.S. Treasuries and mortgage-backed securities and steps to provide sufficient liquidity to ensure markets can function smoothly.
"The actions we have announced today will help American families and businesses, and indeed, our entire economy weather this difficult period and will foster a more vigorous return to normal once the disruptions from the coronavirus abate," Mr. Powell said. "We will continue to closely monitor economic and financial developments and their implications for the economic outlook. We are prepared to use our full range of tools to support the flow of credit to households and business, to help keep the economy strong, and to promote our maximum employment and price stability goals."
One of the FOMC's 10 members voted against the action. Loretta J. Mester, president and CEO of the Federal Reserve Bank of Cleveland, preferred to reduce the target range to 0.5% to 0.75%, according to the committee's statement.
Following the Fed's announcement, the S&P 500 index opened more than 8% lower Monday morning, immediately triggering the "circuit-breaker," a mechanism that stops trading for 15 minutes when an index falls 7% from its prior close.
The committee's decision Sunday is in lieu of its scheduled meeting Tuesday and Wednesday this week, Mr. Powell said.