The benchmark rate cut is the result of market fears over the COVID-19 virus. It should lower adjustable-loan rates and could indirectly push fixed rates lower.
WASHINGTON – The United States’ Federal Reserve on Tuesday voted to cut its benchmark interest rate by 50 basis points to a target range of 1% to 1.25%, a move that was made at an emergency meeting and aimed at jolting the economy amid the worldwide spread of the novel coronavirus.
The Fed made that surprise decision following a conference call Tuesday involving central bankers and finance ministers in the G7 group of advanced industrialized countries. The participants in the meeting reaffirmed their commitment to using all appropriate tools to confront the financial risks associated with COVID-19.
It marks the first time since the 2008-2009 global recession that the Federal Open Market Committee (FOMC), the Federal Reserve’s policy-making body, has cut its key federal-funds rate in between policy meetings.
“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity,” the FOMC said in a statement. “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%.”
Fed Chairman Jerome Powell and the nine other voting members of the committee, which last met in late January and had not been scheduled to meet again until March 17-18, unanimously backed the policy action.
U.S. President Donald Trump, who has frequently slammed the Fed for not lowering interest rates more sharply, tweeted early Tuesday that the central bank was failing to take the same decisive action that is being seen in other countries.
“Australia’s Central Bank cut interest rates and stated it will most likely further ease in order to make up for China’s Coronavirus situation and slowdown. They reduced to 0.5%, a record low. Other countries are doing the same thing, if not more so,” the president wrote.
“Our Federal Reserve has us paying higher rates than many others, when we should be paying less. Tough on our exporters and puts the USA at a competitive disadvantage. Must be the other way around. Should ease and cut rate big. Jerome Powell led Federal Reserve has called it wrong from day one. Sad!”
There are more than 100 confirmed cases of COVID-19 in the US and the disease has been blamed for six deaths in Washington state, according to the Centers for Disease Control and Prevention.
© 2020 EFE News Services (U.S.) Inc.