Illustration: Sarah Grillo/Axios

The Federal Reserve, in conjunction with central banks around the world, took drastic action on Sunday night — the kind of action not seen since the global financial crisis — to try to prevent the novel coronavirus from devastating the economy.

What they did: The Fed slashed interest rates to near zero Sunday night, announced a $700 billion bond-buying program, and relaxed bank capital regulations to encourage further lending.

Why it matters: Thousands of businesses and millions of households are about to suffer extreme economic hardship. Employers and employees in the travel, entertainment, sports, hospitality, retail, and many other industries are going to see losses and layoffs for as long as COVID-19 is raging.

  • Once the pandemic is over, all of those businesses can and should come roaring back. In order to do so, they will require new loans to help them get through the bad times, as well as money to refinance existing debts as they come due.
  • Monetary policy can't fight the coronavirus directly. But it can help ease the economic pain that the virus causes.

The bottom line: The Fed is using every weapon in its arsenal to encourage banks to lend money freely at the lowest possible interest rates. If its actions work, it will prevent thousands of businesses, large and small, from failing.

Go deeper

How retail investors are beating the pros at their own game

Illustration: Sarah Grillo/Axios

Call it the Robinhood effect. In a tectonic shift that shows how the coronavirus pandemic has upended seemingly every part of our reality, millennials and Gen Z have started to abandon video games and sports betting in favor of a new craze: the stock market.

Why it matters: While many have wagged their fingers at what they see as overconfident and underprepared youngsters day trading on their smartphones, the stock market's new school — a collection of sports bettors, the newly unemployed, Reddit aficionados and eager young investors — is growing into a force on Wall Street.

Why the pandemic isn't like a hurricane

Illustration: Eniola Odetunde/Axios

White House economic adviser Larry Kudlow likes to compare the coronavirus pandemic to a hurricane, arguing it's a devastating but finite event that doesn't leave a lasting economic mark.

Why it matters: It's a flawed analogy being used to inform America's economic policy.

The coronavirus recovery may be W-shaped

Illustration: Sarah Grillo/Axios

U.S. economic data has shown improvement in recent reports, starting with May's nonfarm payrolls report and including new home sales, various Fed manufacturing indexes and retail sales, all showing better-than-expected rebounds.

Why it matters: The momentum could reverse quickly if the coronavirus pandemic picks back up and policymakers drag their feet on renewing stimulus measures, experts say.