• Subscribe to read the Financial Times website
• Access various sections like World, US, Companies, Tech, Markets, Climate, Opinion, Lex, Work & Careers, Life & Arts
• Explore subscription options including Digital, Print, and Print + Digital packages
The Federal Reserve made an emergency half percentage point interest rate cut today in response to the economic risks posed by the coronavirus outbreak. President Donald Trump said the rate cut showed the US economy is in very bad shape.
The Rate Cut
The Fed lowered its benchmark rate by 50 basis points to a range of 1% to 1.25%. This is the first time the central bank has cut rates between scheduled policy meetings since the 2008 financial crisis. The Fed said the fundamentals of the US economy remain strong but decided the rate cut was necessary to combat the threat posed by the coronavirus.
Trump’s Assessment
President Trump said the emergency rate cut made him very unhappy and was an admission that the US economy is doing poorly. He said Fed Chair Jerome Powell “let us down” by not cutting rates sooner. Trump has repeatedly accused Powell of not being aggressive enough in supporting economic growth.
Market Reaction
Stock markets rallied on the announcement of the rate cut. The S&P 500 index hit an intraday record high, recovering some of the steep losses in recent days triggered by coronavirus worries. Investors are betting the Fed will cut rates further to shield the economy from the effects of the outbreak.
Economic Outlook
The rate cut reflects growing fears that the spreading coronavirus will severely slow global economic growth. Manufacturing, tourism and other industries are being hit hard by quarantines, supply chain disruptions and travel restrictions. Analysts warn the US is vulnerable to an economic shock due to high debt levels and inequality.
