Federal Reserve Cuts Interest Rates as COVID-19 Spreads

When the United States Federal Reserve cut interest rates by a quarter-point in October, it was expected that no further cuts would occur in 2020. However, with the novel coronavirus — officially known as COVID-19 — threatening the global economy, the Fed made the rare move of adjusting their benchmark rates outside of their regular quarterly meetings. What more, as CNN reports, the agency cut rates by half a percentage point, putting the new range at  1%-1.25%.

As noted, these “emergency rate cuts” aren’t common for the Fed. In fact today’s was the first to come since 2008. Announcing the decision, the agency wrote, “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. 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,” adding, “The Committee 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 Fed’s move comes after deep sell-offs plagued the markets last week. However Monday brought a rebound of sorts with the Dow seeing its largest single-day point gain ever. As of this writing, Tuesday’s market session has proven more volatile, rising with the Fed’s announcement and then dipping afterward (with more ups and downs following that).

Meanwhile President Trump, who has been a long-time critic of the Fed and his appointee Jerome Powell, tweeted that he was pleased with the cut but wanted even more. The President wrote, “The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!” It’s also worth noting that today is Super Tuesday, with results potentially pointing to who Trump’s Democratic challenger will be in the upcoming Presidential election. Many have suggested that a strong economy would bode well for the President’s chances of seeing another four years in office, hence the emphasis Trump has placed on the market highs and unemployment lows.

Speaking to reporters, Powell noted that, while the cut won’t prevent people from becoming infected with the virus nor fix supply chain issues that have emerged due to several Chinese factories closing, “it will help boost household and business confidence.” Of course he also noted that, at this point, it’s hard to say what impacts COVID-19 will have or how long those effects will be felt for. Thus it’s far too early to say whether we’ll see more stimulatory actions or whether these cuts might be reversed were the situation to improve. Stay tuned.


Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Marqeta Expands Credit Program with New APIs and More

A FinTech that specializes in creating credit card experiences is rolling out some new features. This week, Marqeta announced what it calls a "significant expansion" of its credit platform. This includes more than 40 new credit APIs that will further help clients craft and launch their own credit card products. Additionally, the company notes an updated intuitive dashboard. Using this platform, businesses can create unique card options that can not...

PayPal Launches Small Business Credit Card with Flat 2% Cashback

The popular platform PayPal is rolling out a new product built specifically for small businesses. Today, the FinTech announced the launch of The PayPal Business Cashback Mastercard. The new card will be issued by WebBank and marks the first time PayPal has offered a business credit card. With the PayPal Business Cashback card, business owners will be able to earn 2% cashback on all purchases. This earning rate is not...

Wells Fargo Unveils New Autograph Rewards Visa Card

A new rewards credit card is on the way from Wells Fargo. Today, the bank introduced its Autograph card, which expands the company's refreshed card portfolio. In terms of rewards, the Wells Fargo Autograph Card will earn 3 points per dollar spent in a number of categories. These include restaurants, travel and transit, gas stations, select streaming services, and phone plans. All other purchases will earn 1x points. Beyond the...