WASHINGTON — The Federal Reserve announced on Sunday that it would drop interest rates to zero and buy at least $700 billion in government- and mortgage-related bonds as part of a wide-ranging emergency action to protect the economy from the effect of the coronavirus outbreak.

The moves, the most dramatic by the U.S. central bank since the 2008 financial crisis, are aimed at keeping financial markets stable and borrowing costs as low as possible as businesses around the country shutter and the U.S. economy hurtles toward recession.

The Fed, led by Chairman Jerome Powell, effectively cut its benchmark by a full percentage point to zero. The benchmark U.S. interest rate is now in a range of 0 to 0.25 percent, down from a range of 1 to 1.25 percent.

The Fed also announced that it is restarting the crisis-era program of bond purchases known as “quantitative easing,” in which the central bank buys hundreds of billions of dollars in bonds to further push down rates and keep markets freely flowing. To help Main Street, the Fed is also giving more-generous loans to banks around the country so they turn around and loan to small businesses and families in need of a lifeline.

President Trump congratulated the Fed and said its decision to lower interest rates “make me very happy.”

In the coming months, the Fed will purchase at least $700 billion more in bonds as part of its new quantitative easing. The majority of that, at least $500 billion, will be U.S. Treasury bonds. The rest will be mortgage-backed securities.

The Fed vowed in a statement Sunday to use its “full range of tools” to support the economy and the “smooth functioning of markets.” The Fed’s actions Sunday come on the heels of an emergency interest rate cut on March 3 and a large $1.5 trillion injection into the bond market last week to ensure sufficient liquidity for normal market operations.

The ultra-low interest rates are expected to remain until the U.S. economy recovers from the coronavirus downturn. “The (Fed) expects to maintain this target range until it is confident that the economy has weathered recent events,” the central bank wrote in a statement released Sunday evening.

Layoffs have begun across the country as large and small businesses see a dramatic decrease in sales. The Dow Jones industrial average remains in bear market territory after the swiftest 20 percent plunge in U.S. stock market history.

By deploying much of its arsenal Sunday, the Fed left open the risk that even these moves would prove inadequate and it would have to take further measures later on. But while the Fed could launch more bond purchases or do other experimental actions to try to drive rates lower, it’s not clear what else the Fed could try that would significantly alter the economy’s path.

Trump has urged the Fed to make the nation’s interest rates negative, something that has never happened in the United States. It would mean that savers are literally fined for putting money in the bank while borrowers are paid to take out loans. Europe and Japan have tried negative rates with mixed success.

“They are not out of tools, but they’ve used the biggest tool they have, the interest-rate tool, the one that’s been proven over the years to work the most effectively,” said Don Kohn, Fed vice chair during the 2008 financial crisis. “Even if they did go below zero, they wouldn’t be able to go far below zero.”

Such heavy-handed Fed actions raises concerns that the economy might be in worse shape than many experts thought. After the Fed cut rates two weeks ago, markets sold off on fears that the economy was in a faster dive than originally believed.

“The Fed and other central banks have gone all out to aid the world economy today,” wrote Chris Rupkey, chief financial economist at MUFG Bank. “Some times the massive Fed interventions have generated even more panic selling in the markets as it shows the severity and concern of Fed officials of just how bad the risks are that the economy.”

Trump has been pushing the Fed for days to do more to prop up markets and try to prevent the economy from falling into a recession. But while many economists agree that the Fed can provide needed stability to the economy, they say Congress will need to pass legislation to stimulate growth or provide security as people lose jobs or are forced to stay home.

Most economists have urged Congress and the White House to develop a major stimulus package to protect workers and businesses from collapse. On Saturday, the House passed billions of dollars of additional funding for health care and workers who must stay home.

In addition to cutting interest rates Sunday, the Fed is giving banks the ability to borrow money from the central bank for up to 90 days, a big jump from the mostly overnight loans that were previously available. Starting Monday, banks can barrow from the Fed at a rate of 0.25 percent, a massive cut from the 1.75 percent rate that was in effect before.

The move is meant to help ensure that banks have enough cash on hand to support small businesses and American families as they deal with cash-strapped times in the coming weeks.

“This is not just a lifeline for America’s banks, it’s a long life line,” said Danielle DiMartino Booth, founder of Quill Intelligence and a former top adviser at the Dallas Fed. “The Fed is trying to say to every small and medium sized bank in America you have access to funding when you need it.”

The Fed bank also announced joint action with central banks around the world.

The Fed is extending U.S. dollar swap lines to other key nations, including Japan, England, Europe, Canada and Switzerland to ensure that they have enough dollar reserves on hand. This is another move straight out of the Fed’s 2008 emergency playbook.

Kohn, the former Fed vice chair, said the central bank could purchase more bonds and extend more loans to banks. But it would take action by Congress to give the Fed the ability to do more directly for consumers or small businesses.

Treasury Secretary Steven Mnuchin said Sunday that he is in daily conversation with Powell and that the two are working hand-in-hand. Mnuchin suggested that he might ask Congress to grant the Fed more tools to help the economy. The sweeping Dodd-Frank legislation scaled back some powers from the Fed and the Treasury. There are calls now to reverse that.

“Certain tools were taken away that I am going to go back to Congress and ask for,” Mnuchin said on ABC’s “This Week.”

All but one Fed leader voted in favor of Sunday’s extraordinary moves. Cleveland Fed President Loretta Mester preferred to keep interest rates slightly higher, but she was outvoted.

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