The US Federal Reserve has cut its benchmark lending rate to virtually zero per cent and said that it will employ all available tools to promote resumption of sustainable economic growth and preserve price stability.
"The Federal Open Market Committee (FOMC) today decided to establish a target range for the federal funds rate of 0 to 1/4%," the Federal Reserve said in a statement.
FOMC anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
The statement further said the outlook for economic activity has weakened further as consumer spending, business investment and industrial production have declined. Besides, financial markets remain quite strained and credit conditions are tight.
The focus of the committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level, the statement added.
Further, the committee expects inflation to moderate in coming quarters due to declining prices of energy, other commodities and weaker prospects for economic activity.
The Federal Reserve had earlier announced that over the next few quarters, it would purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.
The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity, the statement added.