The Fed also said that it will increase its holdings of Treasury securities by at least $500 billion and its holdings of agency mortgage-backed securities by at least $200 billion over coming months.

"The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals," the central bank said.

The Fed's latest action came less than two weeks after it slashed rates by a half percentage point in an emergency move that failed to reassure nervous investors, as the coronavirus outbreak has posed "evolving risks" to economic activity.

About 55 business and academic economists recently polled by The Wall Street Journal expect, on average, US gross domestic product (GDP) to contract at an annual rate of 0.1 percent in the second quarter due to the epidemic.

That is a large downgrade from forecasts in February, when those economists expected US GDP growth of 1.9 percent from April to June, the poll showed.