Coronavirus us federal reserve cuts interest rate to zero

You're referring to the extraordinary measures taken by the US Federal Reserve in response to the COVID-19 pandemic!

On March 3, 2020, the Federal Reserve, the central bank of the United States, took a historic step by cutting the federal funds target rate to a range of 0% to 0.25%. This move was unprecedented, as the previous record low was 1.5% in December 2008, during the Global Financial Crisis.

The decision was made to mitigate the economic impact of the coronavirus pandemic, which was spreading rapidly across the globe, causing widespread disruptions to businesses, supply chains, and financial markets. The Fed's action aimed to:

  1. Stimulate economic growth: By reducing interest rates, the Fed hoped to encourage borrowing, spending, and investment, which would help support economic activity and prevent a recession.
  2. Stabilize financial markets: The rate cut was intended to calm market volatility, reduce uncertainty, and prevent a credit crunch, which could have exacerbated the economic downturn.
  3. Support the economy's liquidity: The Fed's action aimed to ensure that banks and other financial institutions had sufficient liquidity to meet the increased demand for credit and cash.

The zero-interest-rate policy (ZIRP) was accompanied by other measures, including:

  1. Quantitative easing: The Fed began purchasing Treasury securities and mortgage-backed securities to inject liquidity into the financial system.
  2. Forward guidance: The Fed communicated its intention to keep interest rates low for an extended period to support the economy.
  3. Emergency lending facilities: The Fed established emergency lending facilities to provide loans to banks, businesses, and other organizations affected by the pandemic.

These measures have helped stabilize the US economy, but the pandemic's impact has been significant, and the recovery has been slow and uneven. The Fed has continued to take extraordinary measures to support the economy, including additional rate cuts and asset purchases.