Washington, Mar 16 (IANS): The US Federal Reserve has cut its benchmark interest rate by a full percentage point to near zero and will increase its bond holdings by at least $700 billion amid mounting fears over COVID-19 outbreak.

"The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the US," the Fed said in a statement on Sunday after an emergency policy meeting, adding global financial conditions have also been "significantly affected", Xinhua reported.

The central bank noted that the effects of the coronavirus will "weigh on" US economic activity in the near term and pose risks to the economic outlook. Therefore, the Federal Open Market Committee (FOMC), the Fed's policy-making committee, decided to lower the target range for the federal funds rate to 0-0.25 per cent.

"The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals," said the Fed.

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.