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Federal Reserve Made Emergency Rate Cut Due to the Impact of Coronavirus

Are you guys worried about the virus which starts to spread in the US? In order to protect the economy from the impact of coronavirus, the central bank has cut the interest rates by half a percentage point on Tuesday, which is the biggest single cut since the 2008 financial crisis. Even if the stock market in the US rebounded after the rate cut, the concerns about the Fed’s impotence in the face of economic risks from the coronavirus still quickly resulted in a market selloff. By late Tuesday, stocks were sharply lower and bond yields had dropped sharply to previously unthinkable lows as investors sought a safe place to store their money. The market’s negative reaction may reflect a recognition that cutting interest rates or engaging in other types of fiscal stimulus cannot contain the virus that has sickened more than 90,000 people globally. Though cutting rates can raise confidence and help to keep borrowing cheap, it cannot prevent disease from spreading or help companies deal with delayed orders or an infected workforce.

“We do recognize that a rate cut cannot reduce the rate of infection, it won’t fix a broken supply chain,” said by Mr. Powell, the chair of the Federal Reserve.

Many economists predict that the United States could face a significant economic slowdown or even a recession if efforts to contain an outbreak here fail.

However, the president Trump seems does not worry much about it. “We are not looking at that at all,” Mr. Trump said. “But we are looking at other countries and we are being very stringent,” he told reporters before boarding his Marine One helicopter to fly to the National Institutes of Health for a visit. His comments came as Washington State reported another death from the coronavirus, raising the death toll in the United States to nine.

In my opinion, even though the situation about the virus in the US is not that serious, the US government still need to prepare well to prevent the spreading of the virus within the country. Like what an epidemiologist from CDC said, “the outbreak is not whether it will happens, but when it will happens”.

Original Story “Fed Makes Emergency Rate Cut, but Markets Continue Tumbling” Jeanna Smialek and Jim Tankersley, The New York Times, March 3, 2020

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