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

Robinhood Reveals More Details on Upcoming Retirement Account

After officially announcing plans for retirement accounts during an earnings call last month, Robinhood has now revealed more details about the upcoming feature and opened a waitlist for customers. First, Robinhood Retirement will offer both Roth and Traditional IRAs to users. With these accounts, customers will be able to invest in stocks and ETFs. Additionally, accountholders will be able to craft a custom portfolio and will be able to view...

Discover Announces 5% Bonus Categories for First Quarter of 2023

The popular Discover It card — which features 1% on all purchases as well as a slate of bonus rotating categories each quarter — has revealed what purchases will earn cardholders that 5% bonus starting January 1st. For the first quarter of 2023, Discover It cardholders can earn 5% back on grocery store, drug store, and select streaming service purchases. However, there are a few asterisks to note with this offer....

AllWork Raises $4.9 Million From FINTOP Capital 

A FinTech focused on freelancer payroll has closed a significant early-round investment. This week, AllWork announced that it had raised a $4.8 million round. The Series A was led by Nashville-based FINTOP Capital with no other participants. As a result of the transaction, FINTOP's Chris Haley and Rick Holton will join AllWork's board of directors. Previously, AllWork closed a $3.8 million seed round in 2019, bringing their to-date funding total to $8.7...