The Federal Reserve made an emergency announcement Sunday afternoon by announcing that it would be cutting interest rates to zero for the first time since the financial crisis.

The central bank said it will use its “full range of tools” to battle the economic impacts of the novel coronavirus and announced quantitative easing in the form of at least $700 billion of asset purchases.

“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,” Fed Chairman Jerome Powell said in a statement.

Powell said the U.S. economy appeared to have “strong footing” ahead of the coronavirus outbreak, but said the negative impact to key industries like travel, leisure, and hospitality “means that the second quarter [of growth] is probably going to be weak.”

The Fed chairman said Congress and the White House will ultimately have to address the health implications of the crisis, adding that only fiscal policy can “direct relief to particular populations and groups.”

Powell reiterated several times in a Sunday night press conference that the actions are designed to motivate banks to support businesses, as quarantines around the country raise concerns that businesses will have to close their doors and possibly lay off workers.

Powell said lowering rates to zero "will matter to borrowers who will get some relief from our cuts, but they’ll matter a lot more when the economy begins to recover."

Federal Reserve Chair Jerome Powell announces emergency action as the coronavirus pandemic shuts down parts of the global economy. (AP Photo/Jacquelyn Martin) More

The emergency move on Sunday slashed rates by 100 basis points, less than two weeks after it had already made an impromptu 50 basis point cut. Powell said the Fed is not considering negative interest rates.

“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 Fed also resumed the crisis-era policy of large-scale asset purchases by committing to Treasury purchases of at least $500 billion and agency mortgage-backed securities of at least $200 billion “over coming months.”

Powell said the purchases have no monthly or weekly cap.

“The desk is going to go out and buy at a strong rate that we think will restore market function, liquidity, as quickly as it can be restored. That language is open ended."

The central bank was scheduled to hold a Federal Open Market Committee meeting on March 17-18 with a policy announcement on March 18. In the face of accelerating cases of the coronavirus around the world, the Fed pulled the decision forward.

The decision was voted on by all members of the FOMC with the exception of Cleveland Fed President Loretta Mester, who supported all the actions but preferred only a 50 basis point cut to a target range of between 0.5% and 0.75%.

Maintaining credit

The Fed said it is “carefully monitoring credit markets,” where market liquidity has been a concern as markets churned over the impact of the coronavirus.

Churns in the Treasury market pushed the Fed to restart its quantitative easing program with purchases of U.S. Treasuries and agency mortgage-backed securities. The Fed said it will begin those purchases with a $40 billion buy beginning Monday and an $80 billion purchase of agency MBS over the next month.

A statement from the New York Fed clarified that both purchase programs can be “adjusted as appropriate to support the smooth functioning” of markets.

To relieve pressures in money markets, the Fed already announced two days ago that it would offer more than $1 trillion in temporary repurchase agreement operations out of its New York branch.