Fed Announces Emergency Rate Cut to Fight Coronavirus Economic Risks

The Federal Reserve announced an emergency interest rate cut Tuesday, saying it was slashing its benchmark target by half a percentage point to combat the risks by the global outbreak of the coronavirus.

This was the largest move in interest rates since the Fed cut rates during the financial crisis and the first emergency cut since late 2008. Typically, the rate target only moves its rate target at scheduled meetings. The next meeting is set to begin in two weeks.

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1‑1/4 percent,” the Fed said in a statement.

In a press conference held after the announcement, Fed chair Jerome Powell said outbreak had disrupted economic activity in many countries and led to “significant movements” in financial markets.

Iran Accused of Hacking French Supermarket Refrigerators in Latest Cyber Attacks: ‘Unprecedented’

Watch: Liam Neeson Unable to Hide His Disgust When He Learns How Netflix Is Butchering ‘Narnia’

Dana White takes questions at podium during White House briefing with Trump

Jeffries vows Democrats won’t ‘give a dime’ to Trump’s deportation efforts

Watch: CNN Interview Blows Up in Garcia’s Face After He Talks About Stephen Miller’s Crimes, But Can’t Name Any… Twice

Trump tells DHS chief to work with Democrats on immigration reform, but no amnesty

Breaking: GOP Navy SEAL Vet Holds on to House Seat in Battleground State

Trump’s redistricting gamble faces reckoning as GOP holdouts claim vindication

FBI investigates suspected homicide aboard MSC Seascape cruise ship after sudden return to Texas

Arizona Republican holds House seat, surviving re-election scare

White House doubles down after Trump angers base by floating illegal alien deal with Dems

Hakeem Jeffries’ Speakership Hopes Take a Blow as Newly Elected Democrats Bring Chaos on Their First Day in D.C.

Next Generation OPIR GEO: Building America’s gateway to the future of space-based missile warning and tracking

Three Former Trump Admin Officials Launch $1 Billion Company That Puts a New Spin on Data Centers

Spanish prime minister calls meeting over ‘migration emergency’ as thousands surge into Canary Islands

“The virus and the measures being taken to contain it will surely weigh on economic activity both here and abroad for some time,” Powell said.

The rate cut comes after ten days or so of mounting concerns over the coronavirus roiling financial markets. President Donald Trump has urged the Fed to take action a number of times over the past week, arguing that the central bank had to deploy a more accommodative monetary policy to deal with the economic risks because Democrats in Congress were unlikely to vote for a tax cut to stimulate growth.

Powell denied that pressure from the president had played any role in the decision to cut rates, saying the Fed had only taken into account its analysis of the economic situation in light of its mandate to foster price stability and maximum employment.

“We’re never going to consider any political considerations whatsoever. We will not do that and it’s very important that the public understand that,” Powell said.

Financial markets themselves have pressured the Fed, pushing longer-term interest rates to record lows and fed funds futures prices to reflect what amounted to a demand by investors that the Fed move off its previous “wait and see” stance.

The first U.S. deaths from the coronavirus were reported Saturday. At the time of the Fed announcement Wednesday, the death toll had climbed to 6. Some have argued that the health impacts in the U.S. are unlikely to be large and described the coronavirus as likely to be similar to a “very bad flu season.” Powell pointed out that the economic toll could still be significant.

“For us what really matters is not the epidemiology but the risks to the economy. So we saw the risks to the economy and chose to act,” Powell explains.