Fed cuts rates by half a percentage point to combat coronavirus slowdown

The Federal Reserve announced an emergency rate cut Tuesday of half a percentage point in response to the growing economic threat from the novel coronavirus. The move was the first such cut since December 2008, during the financial crisis. It comes amid a volatile patch on Wall Street and amid a steady stream of hectoring from President Donald Trump, who has called for lower rates to stay competitive with policy at other global central banks.

The Fed has scheduled a news conference at 11 a.m. ET during which Chairman Jerome Powell will address the matter. Trump said in a tweet that the cut isn’t enough, though Treasury Secretary Steven Mnuchin said “I applaud the Fed on this move.” Markets were volatile after the move, initially surging then briefly turning negative before heading back up again as participants gauged what impact the cut would have. The move came the same morning that G7 officials offered unspecified measures to help impacted countries and a day after the International Monetary Fund made a similar commitment.

Wall Street had been looking for rate cuts and is pricing in a small chance that the Fed goes all the way to zero by the end of the year. With the change, the Fed’s benchmark funds rate will now be targeted in a range between 1%-1.25%. The Fed had reduced the rate three times in 2019 for a total of 75 basis points. Markets had been widely expecting the U.S. central bank to take some type of action, with anticipation of a 50 basis point cut by the FOMC’s March meeting. Goldman Sachs economists over the weekend said they anticipated a 50 basis point cut that could come before the meeting.

Fed cuts rates by half a percentage point to combat coronavirus slowdown, CNBC, Mar 3