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Federal Reserve cuts rates

Federal Reserve Chairman Jerome Powell (Credit: Bloomberg)

The Federal Reserve executed an emergency half-percentage-point rate cut and markets slid, reflecting fears the coronavirus epidemic is raising recession risks for the U.S. and global economies, WSJ reported.

  • Dig Deeper: The Fed reduced the federal-funds rate to a range between 1% and 1.25% in the first rate change in between scheduled Fed policy meetings since the 2008 financial crisis. Major market indexes declined around 3% and the yield on the benchmark 10-year U.S. Treasury dipped below 1% for the first time as investors sought havens.
  • What comes next: Economists at Goldman Sachs see the U.S. avoiding a recession for now, but have downgraded the U.S. growth forecast to an annualized rate of 0.9% in the first quarter and 0% in the second quarter. JPMorgan Chase nows sees a 50% chance the Fed will cut rates this year to zero, WSJ noted.
  • Heard on Street: Fed Chairman Jerome Powell: “A rate cut will not reduce the rate of infection. It won’t fix a broken supply chain. We get that, but we do believe that our action will provide a meaningful boost to the economy.”

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