Timeline: Fed's response - pandemic downturn vs financial crisis

SAN FRANCISCO/WASHINGTON (Reuters) - The economic dislocation caused by the coronavirus crisis is unfolding with breathtaking speed.

FILE PHOTO: The U.S. Federal Reserve Board building on Constitution Avenue, Washington, U.S., March 19, 2019. REUTERS/Leah Millis

Below is a timeline of U.S. monetary policy responses to the last financial crisis and to the current pandemic. From the first crisis-fighting interest rate cut to zero rates, the Fed took 15 months in the last crisis; this time it took two weeks. Last time the interval between zero rates and the start of open-ended bond-buying was 49 months. This time it was eight days.


December 2019: First reports of a new virus infecting hundreds, then thousands, in Wuhan, China.

Jan. 21, 2020: First case of new coronavirus is reported in the United States.

Jan. 28-29: The Fed holds its first policy meeting of the year. Policymakers see 2020 as likely a year of steady growth with continued strength in the job market, and Fed Chair Jerome Powell expresses cautious optimism, in contrast to a rocky 2019 in which the Fed cut rates three times to blunt the effects of the Trump administration’s trade war with China.

Friday, Feb. 28: In an abrupt turn, Powell releases a short statement pledging to “act as appropriate” in the face of economic impacts from the coronavirus outbreak as stock market losses accelerate, risk premiums on corporate bonds widen and the U.S. Treasuries market is hit by deep illiquidity.

Monday, March 2: The Fed holds an emergency meeting by videoconference and unanimously decides to cut interest rates by 50 basis points as “a clear signal to the public that policymakers recognized the potential economic significance of the situation and were willing to move decisively.” The cut is announced on the morning of Tuesday, March 3.

Sunday, March 15: After another emergency videoconference, the Fed slashes rates by 100 basis points to near zero, reintroduces forward guidance, restarts large-scale asset purchases and launches coordinated swap lines with five major foreign central banks, among other measures. One policymaker dissents. The Fed says the pandemic will take a “toll on U.S. economic activity in the near term” and makes clear it is “prepared to use its full range of tools to support the flow of credit to households and businesses.”

March 16-31: The Fed launches range of measures to increase liquidity in financial markets and promises unlimited, open-ended large-scale asset purchases, including purchases of corporate and municipal bonds.

April 9: The Fed rolls out a $2.3 trillion emergency lending effort to bolster local governments and small and mid-sized businesses.


April 2007: The first signs of trouble in the U.S. subprime housing market emerge as early as 2006; New Century Financial Corp, the largest U.S. subprime lender, files for bankruptcy in April 2007.

September 2007: The Fed cuts interest rates for the first time, citing concerns about tightening conditions in credit markets, which could aggravate what it described as a “housing correction.” It would cut rates seven more times in the next 15 months.

December 2007: U.S. recession starts, as dated later by the National Bureau of Economic Research.

March 2008: The Fed helps engineer JP Morgan’s takeover of collapsing investment bank Bear Stearns.

September 2008: With the crisis reaching full steam, housing finance giants Fannie Mae and Freddie Mac are placed into conservatorship in the first week of the month. Just over a week later investment bank Lehman Brothers collapses. The following day the government rescues insurer AIG from bankruptcy with an $85 billion lifeline. Later that same day, the Reserve Primary Fund, the oldest U.S. money market, sees its net asset value drop below the critical $1 per share level, sparking a run on money market funds.

December 2008: The Fed drops U.S. interest rates a final time to near zero.

Reporting by Ann Saphir and Lindsay Dunsmuir; Additional reporting by Dan Burns and Howard Schneider; Editing by Dan Burns and Aurora Ellis