Emergency Rate Cut By U.S. Federal Reserve

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The Federal Reserve lowered its benchmark rate by 50 basis points to a range of 1% to 1.25%.

WHY THIS IS A EMERGENCY RATE CUT?

The central bank was schedule to meet on March 18.
But this was the emergency move made by the Federal
The last time the bank made an interest rate cut at an emergency meeting was during the global financial crisis of 2008.

The emergency move comes after the G7 group of finance ministers pledged action earlier on Tuesday.
It follows warnings that slowdown from the outbreak could tip countries into recession.

WHY THIS WAS A SURPRISE MOVE BY FED

The unanimous decision is a “dramatic turnaround from last week“,
Many Fed officials appeared confident that rates, already low by historical standards, would not need to be cut further

BUT, WILL IT BE HELPFUL?

Many economists had been cautioning that lower interest rates aren’t the ideal prescription for the threat posed by the coronavirus.
Lower rates can lead people and businesses to borrow and spend, which can boost economic activity.
But they can’t directly address the problems that the virus has caused — from closed factories to canceled business travel to disrupted company supply chains.

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