Federal Reserve cuts interest rate by most since 2008 to combat coronavirus slump
Updated: Mar 16
The U.S. central bank lowered its benchmark interest rate by 50 basis points (0.5%) to a range of 1% to 1.25% on Tuesday in an attempt to stimulate the economy and protect it from the effects of the coronavirus.
"The fundamentals of the US economy remain strong. However, the coronavirus poses evolving risks to economic activity," Federal Reserve Chair Jerome Powell said in a press conference on Tuesday.
"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,” the Fed said.
The move marks a stark shift for Powell and his colleagues. The Fed had previously projected no change in interest rates through 2020, remaining on the sidelines during a U.S. election year, after lowering their benchmark three times in 2019 to a range of 1.5% to 1.75%.
The central bank also said it is “closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”
The rate cut came the same morning the G-7 announced that it would commit unspecified tools to help the global economy deal with the threat, and as stocks were in the midst of another market sell-off--though the DOW Jones had its best single-day gain ever on Monday.
The Federal Reserve policymakers are scheduled to meet on March 17-18 in Washington.