The U.S. Federal Reserve said Sunday it will lower its key interest rate to near zero and make massive bond purchases in its latest emergency move to shield the world's largest economy from the fallout from the new coronavirus.

Based on the decision by the policy-setting Federal Open Market Committee, the central bank said it will cut its target range for the federal funds rate by 1 percentage point to 0.00 to 0.25 percent, the lowest level since 2015. The action followed an emergency rate cut of 0.50 point on March 3.

The Fed also pledged to buy at least $500 billion in Treasury securities and $200 billion mortgage-backed securities over the coming months, signaling a return to quantitative easing to boost liquidity in the economy.

Meanwhile, six central banks, including the Fed, the Bank of Japan and the European Central Bank, announced that they will take coordinated action to enhance the provision of U.S. dollar liquidity.

Noting that the virus outbreak has disrupted economic activity in the United States and significantly affected global financial conditions, the Fed said in a statement that it will maintain the target range until it is "confident that the economy has weathered recent events."

The last time the U.S. central bank resorted to a zero-interest rate policy was in December 2008 amid the global financial crisis, triggered by the collapse of U.S. investment bank Lehman Brothers Holdings Inc.

Quantitative easing was also introduced around that time and the interest rate was kept at 0-0.25 percent through the end of December 2015.

While admitting that the risk to financial stability worsens when high market volatility like now is observed amid the uncertainty over the outlook, Fed Chairman Jerome Powell said in a conference call that the bank will be paying attention to the Treasury market, which he said has shown signs of "stress" in the past week.

"Our original role was providing liquidity to financial systems when they're under stress, and that's really part of what we did today. The other role is to support demand through lower interest rates, and we did that," he said.

(Times Square in New York City on March 12, 2020.)[Corbis/Getty/Kyodo]

Financial markets have remained volatile despite the Fed's March 3 action, which was the first emergency rate cut since the 2008 global financial crisis. As investors dumped stocks and flocked to safe-haven assets, the benchmark 10-year Treasury yield briefly touched an all-time low of 0.318 percent on March 9.

Powell said the Fed will continue to closely monitor economic and financial developments and that it is prepared to use its "full range of tools to support the flow of credit to households and businesses to help keep the economy strong."

Looking ahead, the Fed chief said the second quarter of the U.S. economy is probably going to be "weak" due to declining output, but what will happen after that is "unknowable" because it depends on how widely the virus spreads.

But he ruled out considering the introduction of negative interest rates, saying that he does not see them as "likely to be an appropriate policy response here in the United States."

U.S. President Donald Trump, who has criticized the Fed for not being aggressive enough in its monetary easing, said at a press conference Sunday that he was "very happy" about the Fed's actions.

From July to October last year, the Fed cut rates by 0.25 point three times to provide what it called "insurance" against risks, such as the then-intensifying trade war between the United States and China.

The Fed stood pat for some time after that, but it was forced to act from March this year as the virus outbreak showed no signs of abating.

In the United States as of Sunday, over 3,400 people in 49 of the 50 states, plus the U.S. capital, have tested positive for the coronavirus, according to a New York Times database, and more than 65 patients with the virus have died.

The country is moving closer to a shutdown in an effort to stop further transmission of the virus, with tougher travel restrictions imposed against harder-hit countries, large gatherings canceled and schools, entertainment facilities and tourist spots temporarily closed down.