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Fed cuts interest rate to zero, launches $700bn QE programme

The Fed's March 15 move is its second emergency rate cut in less than two weeks

March 16, 2020 / 05:18 PM IST

The US Federal Reserve has cut its key interest rate to virtually zero and launched a massive $700 billion quantitative easing programme.

Citing “the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” it announced drastic emergency measures to shore up confidence and keep the financial sector running.

The Fed's March 15 move is its second emergency rate cut in less than two weeks. The benchmark borrowing rate is now at levels similar to that during the 2008 global financial crisis. It pledged to keep it there "until it is confident that the economy has weathered recent events."

The central bank also slashed the rate of emergency lending at the discount window for banks by 125 basis points to 0.25 percent, and lengthened the term of loans to 90 days. In another move, it removed bank reserve requirements to allow them to use cash backstops.