This is an incredibly bearish signal. The Fed essentially turned its biggest lever all the way, and there's little left in their toolbox. One can only speculate as to why they're panicking like this, but my guess is that it's largely political.
The next big thing would be for the Fed to start buying stocks directly, probably through ETFs, which is something it currently can't do. At the moment it can only buy mortgage backed securities and bonds.
The Fed's move to cut to zero has been expected by everybody over the last few sessions. This is not new information.
As for why they're doing this, well, monetary stimulus is really all the Fed can do, ineffective as it is, and in the vacuum of fiscal intervention from Washington I guess they feel that someone has to do something. By cutting all the way to zero they also put the ball in the government's/congress's court so the focus is on their inaction, where it should be.
Trump made a HUGE deal of being “so surprised” that the announcement by the fed was made just a few minutes into his live press conference. He kept saying over and over that he had no idea this was going to be announced at such an opportune time.
Economic stimulus like this works if it incentivizes people to engage in more economic activity. But it won't because of the virus. In fact I'd argue it is immoral to tempt people into more economic activity right now, something which is significantly at odds with what we all need to do to minimize transmission. Insomuch as it affects the rates on existing loans and provides relief then that's a good thing, but its not well targetted for that purpose.
Same as in the EU where the ECB has a deposit rate of -0.5%. The deposits of banks at the central bank (aka "reserves") shrink over time according to the negative rate.
I don't really understand the economics of it all, but feels bit like throwing gas the flames. The downturn is inevitable. Does this soften it a little bit, I do not know.
If people just stop traveling and spending money like normally, as they are currently everywhere in Europe, there isn't really anything you can do about it. Which will sooner or later happen in US too, that's for sure. Doesn't really matter how cheap the prices are. Unless a vaccine is developed in very near-future, it's now just playing time before a large portion of population will contract Covid-19.
The next big thing would be for the Fed to start buying stocks directly, probably through ETFs, which is something it currently can't do. At the moment it can only buy mortgage backed securities and bonds.