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Photo: Mark Makela/Getty Images

The Federal Reserve on Sunday cut its benchmark interest rate to almost zero and launched a $700 billion quantitative easing program in response to the expected economic downturn and stock market slump caused by the coronavirus.

Why it matters: This is the most drastic measure the Fed could take to try to shield the economy amid a global pandemic. The central bank hasn’t made moves this dramatic since the financial crisis.

“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. ... The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses.”
— Fed statement

Details: The target range for the federal funds rate is now 0%–0.25%. That's 1 percentage point, or 100 basis points, lower than it was going into the weekend.

  • The interest rate at the discount window — the rate at which banks borrow money directly from the Fed — has been slashed by 150 basis points to just 0.25%. The intention is "to help meet demands for credit from households and businesses," per a Fed statement.
  • Banks are being encouraged to lend out their capital rather than hold onto it for regulatory reasons. There is now no reserve requirement for banks.
  • America's largest banks agreed not to spend any capital buying back their shares, at least until the end of June.
  • International capital flows are also being buttressed with coordinated action between the Fed and the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank.

The backdrop: The emergency rate cut — the second since anxiety about the coronavirus took hold of the stock market and the economy — comes a few days before the Fed’s scheduled policy meeting on Wednesday.

  • Importantly, the move came just before Monday morning trading begins in Asian markets. The U.S. stock futures tumbled so sharply after the Fed's announcement that they hit "limit down," which prevents futures from trading 5% below Friday's closing price.
  • The decision was not unanimous. Loretta Mester, president of the Cleveland Fed, voted for a smaller 50bp cut.

Between the lines: At a press conference Sunday night via telephone, Fed chairman Jerome Powell said there's "plenty of power left in [the Fed's] tools" — despite the central bank cutting rates to near zero — should the coronavirus crisis get worse.

  • "We do not see negative policy rates as likely to be appropriate policy response here in the U.S.," Powell said. President Trump has previously called on the Fed, an apolitical institution, to consider negative interest rates.
  • Powell said the Fed was not "actively considering" requesting permission from Congress for more expansive measures.

The bottom line: Powell said the Fed has used its tools "quite aggressively," but that action from Congress to soften the pandemic's blow to the economy is critical.

  • "It's very hard to say how big the effects will be" on the economy, Powell said. "That's going to depend on how widely the virus spreads, which is something highly uncertain and I would say unknowable."

Go deeper

China builds its own movie empire

Expand chart
Data: Gower Street citing Comscore; Chart: Kavya Beheraj/Axios

China blocked all four of Disney's Marvel movies from being released in its theaters last year, a grim sign for U.S. film giants being squeezed out of the world's fastest-growing box office.

Why it matters: The Chinese Communist Party is using domestic films as a key conduit for mass messaging aimed at achieving political goals, leaving little room for foreign views.

Why 401(k) rollovers are so annoying

Illustration: Aïda Amer/Axios

If you happened to change jobs recently, you may have tried to transfer your retirement account from your former employer into an Individual Retirement Account or your new employer's 401(k) plan. If so, you probably encountered a bureaucratic gantlet — and you're not alone.

Why it matters: Kludgey processes around retirement account transfers result in people losing track of their funds, giving up important tax advantages, or otherwise disadvantaging themselves and being less prepared for retirement.

The hard math behind America's labor shortage

Data: Bureau of Labor Statistics, Congressional Budget Office; Chart: Axios Visuals

Yes, the pandemic has created unusual temporary labor market dynamics. But in the bigger picture, the 2010s were a golden age for companies seeking cheap labor. The 2020s are not.

The big picture: In the 2010s, the massive millennial generation was entering the workforce, the massive baby bo0m generation was still hard at work, and there was a multi-year hangover from the deep recession caused by the global financial crisis.