Fed delivers surprise rate cut to combat coronavirus risk

In its most aggressive move since the financial crisis -

The Federal Reserve Tuesday slashed its benchmark rate by one-half a percentage point.

The emergency measure is designed to shield the world's largest economy from the impact of the spreading coronavirus.

Federal Reserve chairman Jerome Powell said the fundamentals of the U.S economy remain strong but the coronavirus outbreak is an emerging threat.


"The virus and the measures being taken to contain it will surely weigh on economic activity both here and abroad for some time. We're beginning to see the effects on the tourism and travel and the tourism industries and we're hearing concerns from industries that rely on global supply chains. Against this background the committee judged the risks to the economic outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy.

That support came in the way of a half percentage point cut in the Fed's key lending rate to a target range of 1.00 percent to 1.25 percent...

The decision was unanimous among policymakers.

The Fed's unusual move to cut interest rates before the next scheduled policy meeting in mid-March reflects the urgency with which the Fed feels it needs to act in order to prevent the possibility of a global recession.

The aggressive move nonetheless failed to impress President Trump, who shortly after called on Powell and the Fed to cut rates even more.


"The Federal Reserve cut rates today, finally. Finally. Finally. Do it more. Do it a little bit more. So the Fed rate is too high. It's very simple: it's too high."

But some on Wall Street remain skeptical a rate cut is the remedy needed to deal with the financial damage and supply chain disruptions caused by the coronavirus outbreak.

To that, Powell had this to say:


"We do recognize that a rate will not reduce the rate of infection, it won't fix a broken supply chain, We get that. We don't think we have all the answers, but we do believe that our action will provide a meaningful boost to the economy."

Investors had been clamoring for the Fed to take action - after stocks suffered their worst losses in over a decade last week and then rebounded sharply on Monday on hopes the Fed would deliver.

But there was no follow through Tuesday - stocks dropped after the Fed's surprise cut and bond yields tumbled to more record lows - a possible sign investors don't think this Fed move will be enough.