Fed cuts rates by 50 basis points amid coronavirus concerns

Fed cuts rates by 50 basis points amid coronavirus concerns
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The Federal Reserve cut interest rates by 50 basis points in an impromptu meeting on Tuesday as a response to the coronavirus.

The cut, which amounts to a half percentage point, lowered the current target range to between 1% and 1.25%. The decision was unanimous among the Federal Open Market Committee members. U.S. stocks fluctuated after the emergency rate cut on Tuesday.

‘Evolving risks to economic activity’

In a statement, the Fed said the “fundamentals of the U.S. economy remain strong” but that the coronavirus “poses evolving risks to economic activity.”

Fed Chairman Jerome Powell said in a press conference that the Fed had judged the spread of the coronavirus to be a “material change” to the Fed’s economic outlook, thus justifying the rate cut.

“Of course, the ultimate solutions to this challenge will come from others, particularly health professionals,” Powell said. “We can and will do our part, however, to help keep the U.S. economy strong as we meet this challenge.”

But Powell cautioned that the Fed’s role is not to judge the epidemiology of the coronavirus, but rather to insulate the U.S. economy from a shock.

“We will get to the other side of this,” Powell said. “I do expect we will return to solid growth and a solid labor market as well.”

The FOMC made the announcement at 10 a.m. ET, two weeks before policy-makers were scheduled to meet (March 18). Powell’s press conference took place at 11 a.m. ET.

The 50 basis point cut Tuesday was the first maneuver on rates outside of a scheduled policy-setting meeting since Oct. 8, 2008, following the collapse of Lehman Brothers.

Source: Yahoo! Finance

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