The Federal Reserve slashed interest rates to near zero on Sunday as the coroanvirus outbreak continues to weigh on global markets, and chairman Jerome Powell said that the central bank is willing to be patient before raising rates again.
"We will maintain the rate at this level until we're confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals," Powell said Sunday during a press conference. "That's the test ... some things have to happen before we consider ... we're going to be watching, and willing to be patient, certainly," he added.
The comments came after the central bank said it was cutting interest rates to near zero and launching a massive $700 billion quantitative easing program in a bid to prop up the economy as the coronavirus outbreak continues to roil markets.
The Fed cut rates to a new range of 0% to 0.25% from 1% to 1.25% and said it would remain there "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 quantitative easing will take the form of $500 billion of Treasurys and $200 billion of agency-backed mortgage securities. The Fed said the purchases will begin Monday with a $40 billion installment.
This is the latest and most drastic move by the Federal Reserve since the coronavirus hit U.S. shores. Earlier this month the central bank enacted a 50 basis point emergency cut — its first such cut since the financial crisis — and also expanded the overnight credit offering, or repo, for the financial system up to $1.5 trillion.
Despite the action by the Federal Reserve, U.S. stock futures pointed to steep losses at Monday's open. Futures hit "limit down" levels of 5% lower, a move made by the CME futures exchange to reduce panic in markets.
Negative rates on government bond yields have become prevalent across Europe and Japan. President Donald Trump, who has been pushing the Fed for easier monetary policy, also has mentioned the benefit of negative rates.
But Powell said it's unlikely that the central bank will entertain negative interest rates as the next step to help the economy.
"We do not see negative policy rates as likely to be an appropriate policy response here in the United States," the chairman said in response to a question during a conference call.
- CNBC's Steve Liesman and Jeff Cox contributed reporting.
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