CORONAVIRUS: US

CENTRAL BANK MAKES

EMERGENCY RATE CUT
Oscar Gómez Rodríguez
8/03/2020
• The Federal Reserve lowered its benchmark rate by 50 basis points to a
range of 1% to 1.25%.
• The emergency move comes after the G7 group of finance ministers
pledged action earlier on Tuesday.
Federal Reserve Chair Jerome Powell said the US economy remains strong
but it is difficult to predict the "magnitude and persistence" of the effects of
the spreading virus.
"The virus and the measures that are being taken to contain it will surely
weigh on economic activity for some time, both here and abroad,"
The last time the bank made an interest rate cut at an emergency meeting
was during the global financial crisis of 2008.
The unanimous decision is a "dramatic turnaround from last week", when
many Fed officials appeared confident that rates, already low by historical
standards, would not need to be cut further, said Paul Ashworth, chief US
economist at Capital Economics said.
"With financial markets in turmoil and evidence growing that the
coronavirus is developing into a pandemic, the Fed's change of heart is
entirely understandable," he said.
However, Peter Tuchman, a stock trader at Quattro Securities, said he did
not think financial markets would necessarily welcome the move. "They're
doing it to support the markets but that makes people fearful that we must
be in bad shape," he told the BBC.
"To pull that bullet out so fast and so furiously leaves us with not that much
ammo," he said.