"The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term", the Fed said in a statement.
The Fed also signalled that it would maintain the federal funds rate at 0 to 1/4 percent for the coming months.
"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", the statement said.
The Fed decision, announced at the conclusion of its Federal Open Market Committee (FOMC) meeting for April, came after the Commerce Department said the US economy shrank 4.8 percent in the first three months of 2020. It was the sharpest economic decline since the Great Recession of 2008/09 and came as the coronavirus (COVID-19) pandemic shuttered non-essential businesses across the country from mid-March.