The Federal Reserve unleashed much of its arsenal Sunday to combat the economic damage caused by the coronavirus, cutting short-term interest rates to zero, renewing its crisis-era bond purchases to pump cash into the financial system and encouraging more bank loans to households and businesses.

The moves, which were cheered by President Donald Trump, are aimed at combating a now-likely U.S. recession.

"The virus presents significant economic challenges," Powell told reporters on a teleconference. "We've taken a number of actions to support American families and the economy overall."

Central bank policymakers agreed to lower the Fed’s benchmark federal funds rate by a full percentage point to a range of zero to 0.25% -- where it hovered for years during and after the 2008 financial crisis.

“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed said in a statement. “The effects of the coronavirus will weigh on economic activity in the near-term and pose risks to the economic outlook.“

The Fed already had cut its key rate by half percentage point earlier this month. Many economists expected the central bank to agree to another percentage point cut at a meeting that had been set for this week, but the Fed decided to move early in a historic show of force.

The central bank is also renewing its bond buying campaign, saying it will purchase $500 billion in Treasury bonds and $200 billion in mortgage-backed securities. The Fed said it will reinvest those proceeds instead of letting them roll off its books. Powell said the Fed is acting chiefly to inject cash into a Treasury market that had become gummed up as investors fears grow. That market is critical to a well-oiled financial system.

Although the Fed last week made $1.5 trillion in short-term loans to jump-start the stalled Treasury market and other asset markets, it had limited success and so it decided to make the bond purchases directly, Powell said.

But the purchases will also push down rates for mortgages and other consumer and business loans, as the more than $3 trillion in Fed bond purchases did during and after the financial crisis. But with long-term rates at historically low levels, some economists have questioned the effectiveness of a new program.

“The Federal Reserve 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,” the Fed said.

"Great news, but not enough on its own," economist Ian Shepherdson of Pantheon Macroeconomics wrote of the rate cut and bond purchases in a note to clients. He said Congress needs to do more than the package the House passed late Friday to help Americans whose health and jobs have been affected by the outbreak.

"We think the Fed has acted now to try to get ahead of what likely will be terrible news on the spread of the virus, both inside and outside the U.S., over the next couple of weeks," Shepherdson said.

But Dow futures fell nearly 900 points after the Fed news.

“The Fed is trying to be preemptive to calm the markets, but what’s worrisome to me is that they've unloaded the gun and there are no bullets left. If the markets don’t react calmly to this, they’re going to take it as a sign of fear and desperation," says Nick Giacoumakis, president of New England Investment & Retirement Group.

Powell, however, said "we think we have plenty of policy space left" and "plenty of powerful tools," citing additional asset purchases and guidance about how long it can keep interest rates near zero.

He said he expects U.S. economic output to decline in the second quarter. “After that, it becomes hard to say and it's going to depend on the” course the coronavirus takes. “The economic data will follow the data on the spread of the virus.”

The Fed, meanwhile, is also encouraging the largest U.S. banks to use the their more than $4 trillion in post-crisis capital cushions to lend money to households and businesses. Those buffers have been designed to guard against another financial crisis.

The central bank is also taking several steps “to support the flow of credit to households and businesses.” It’s lowering its “discount window” rate, the interest it charges banks for short-term loans, by 1.5 percentage points to 0.25%.

And to further bolster lending, the Fed is reducing to zero the level of reserves it requires banks to hold.

The Fed – along with central banks of Europe, England, Canada, Japan and Switzerland – also announced a coordinated effort to bolster liquidity swaps “to ease strains in global funding markets.” It can be difficult for foreign central banks to lend to their financial institutions in U.S. dollars, the world’s reserve currency, if they’re experiencing severe economic and financial stress. The swaps, which central banks also used during the financial crisis, are aimed at alleviating that tension.

Trump applauded the Fed’s decision to cut rates, saying “that makes me very happy.”

“That’s a big step, and I’m very happy they did it,” Trump said at a White House news conference with his coronavirus task force.

Trump has been critical of the Fed and Chairman Jerome Powell, whom he appointed to the chairmanship in 2017. Trump has argued that interest rate hikes have slowed economic growth.

On Saturday, he again complained the central bank hasn’t been “proactive” and hasn’t done enough to calm financial markets amid the coronavirus pandemic. “Our Fed is not doing what they should be doing,” he said.

But after Sunday’s decision to cut rates to zero, Trump’s criticism gave way to praise.

“I would think there are a lot of people on Wall Street that are very happy,” he said. “ I can tell you I’m very happy. I didn’t expect this.”

With breathtaking speed, the virus has become an imminent threat to the 11-year-old economic expansion. Many economists say a recession is inevitable and some believe the nation is already in a downturn.

Initially, the outbreak slowed the delivery of parts and retail products from China and clobbered the travel industry as businesses and consumers canceled conferences and trips. But across the country, the pandemic within just days has led many Americans to avoid crowds and public places, swiftly battering malls, restaurants, movie theaters and sports arenas.

That, along with the other economic troubles, are expected to prompt layoffs that could further hurt consumer spending in a toxic cycle. Banks are likely to suffer as well as some companies struggle to repay loans, potentially causing banks to rein in lending and further worsening the crisis.

The Fed’s moves are largely designed to keep money flowing to small and large businesses that need the cash to continue operating until the crisis eases in weeks or months. There have been more than 162,000 coronavirus cases worldwide and 6,000 deaths. In the US, there have been more than 3,200 cases and a death toll of more than 50.

"We don't have the tools to reach out to individuals and small businesses and people who may be out of work," Powell said. That, he said, is Congress's role.

Contributing: Michael Collins and Jessica Menton