US Federal Reserve announces emergency measures amid coronavirus-triggered slowdown

The growing economic crisis amid the global coronavirus pandemic has led the Federal Reserve to announce drastic emergency measures.

To shore up confidence and to keep the financial sector running, the Federal Reserve has slashed the key interest rate to virtually zero.

This is the second emergency federal rate cut in two weeks. The rate has been cut by 50 basis points to 0.25 per cent.

However, the fresh stimulus has failed to lift confidence.

Jerome Powell, the 16th Chair of the Federal Reserve recently announced that the economic activity will be weak in Q2. He also added that the fiscal response to the coronavirus was 'critical'. Over the last few weeks, USD has slipped owing to the emergency rate cuts.

Additionally, Wall Street futures also dropped sharply, with markets not responding nicely to the Federal Reserve's dramatic steps.

Powell further said that negative interest rates are not likely to be appropriate as the economic outlook continues to evolve daily, with shifting ground based on the progression of the virus.

And, the benchmark borrowing rate has been cut to a range of 0 to 0.25 per cent.

The rates are now at the same level witnessed during the 2008 global financial crisis.

The Federal Open Market Committee also pledged to maintain the same rates "until it is confident that the economy has weathered recent events".

In a series of monetary policy moves, the Federal Reserve also bought 500 billion dollars in treasury debt and 200 billion dollars in other securities.

Federal Reserve chief Jerome Powell was reported saying that the primary purpose of these securities purchases is to restore smooth market functioning so that credit can continue to flow.

If reports are to be believed, the purchases will also foster more accommodative financial conditions.

Powell in a briefing warned that the US economy will be ''weak'' in the second quarter of the year due to coronavirus.

According to predictions, the impact of the coronavirus will be felt in the market during the April-June period and is likely to affect businesses and manufacturing not just in the US, but on a global scale.

However, the chance of recession this year will depend on how soon the pandemic impact can be contained.

Powell also said that the Federal Reserve does not believe that negative interest rates will be appropriate, but fiscal measures by the government are "critical" to respond to the economic damage.

The move was well-received by US President Donald Trump who congratulated the Federal Reserve after it took drastic emergency measures.

Trump has relentlessly demanded federal rate cuts and more rate cuts and is "very happy" with the decision.

On Saturday, Trump asserted he could dismiss Powell, whom he selected for the role.

“I think I have the right to remove. I have the right to also take him and put him in a regular position and put somebody else in charge. And I haven’t made any decisions on that,” Trump told reporters during a coronavirus briefing at the White House

(With inputs from agencies)