The U.S. Federal Reserve cut rates of interest Tuesday in an attempt to shield the world’s most prominent economy from the impact of the coronavirus; however, the emergency move didn’t comfort U.S. financial markets roiled by worries about a deeper, lasting slowdown.
Fed Chairperson Jerome Powell reiterated his view that the U.S. economy stays strong; however, he mentioned the coronavirus outbreak had caused a tangible change in the U.S. central bank’s scope for growth.
Marking how severe the central bank views the fast-evolving situation, it was the first rate cut outside of a scheduled policymaker meeting since 2008 at the peak of the financial crisis.
The pathogen, which born in China, causes a respiratory illness that has been deadly in an estimated 2% of cases, and governments have shut schools and restricted travel and large gatherings in response, denting manufacturing unit output in China and disrupting production of goods worldwide.
All three major U.S. stock market indexes settled nearly 3% lower, while the yield on the 10-year U.S. Treasury note fell below 1% for the first time ever.
President Trump, arriving at the White House as U.S. markets closed, told reporters he had not seen the market’s dip Tuesday and was focused on the coronavirus response.
Futures linked to the Fed’s policy rate had been pricing in another rate cut by June. Fed policymakers will provide their own rate path expectations, including forecasts for economic progress, at the end of their March 17-18 meeting.