On Tuesday, the Reserve cut interest rates by 0.5%, the biggest decrease in rates since 2008.
The interest rate cut comes after President Donald Trump pressured them and because of the volatility of the stock market due to the coronavirus scare.
“We saw a risk to the outlook of the economy and we chose to act,” said Federal Reserve Chair Jerome Powell during a press conference on Tuesday.
They added that more action will be taken in the near future.
“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,” said their statement as reported by the Wall Street Journal.
“The Fed’s action reduces the U.S. interest rate to just below 1.25 percent, down from 1.75 percent,” the Washington Post reports. “Fed leaders voted unanimously in favor of the rate reduction, and Powell tried to project a sense of calm during a short 13-minute press conference. He said repeatedly that the U.S. economic fundamentals still look healthy, but he said ‘sentiment’ had shifted.”
The Wall Street Journal reported: “Tuesday’s cut, which lowered the federal-funds rate to a range between 1% and 1.25%, is the first to occur in between a scheduled policy meeting since the 2008 financial crisis.”
PRESIDENT TRUMP WAS NOT HAPPY
President Trump was not happy about the rate cuts, arguing that they weren’t enough.
He slammed Powell on Monday, tweeting, “As usual, Jay Powell and the Federal Reserve are slow to act,” President Trump tweeted. “Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate. We don’t, putting us at a competitive disadvantage. We should be leading, not following!”
President Trump doubled down as the day wore on, “Australia’s Central Bank cut interest rates and stated it will most likely further ease in order to make up for China’s Coronavirus situation and slowdown,” he wrote. “They reduced to 0.5%, a record low. Other countries are doing the same thing, if not more so. Our Federal Reserve has us paying higher rates than many others, when we should be paying less. Tough on our exporters and puts the USA at a competitive disadvantage. Must be the other way around. Should ease and cut rate big. Jerome Powell led Federal Reserve has called it wrong from day one. Sad!”
On Tuesday, President Trump made it clear that the interest rate cut was not enough: “The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors,” he tweeted. “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!”
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!
— Donald J. Trump (@realDonaldTrump) March 3, 2020
The stocks rose for a while this morning but are now plummeting, nearly taking away yesterday’s gains. By 2:10, the Dow was down over 900 points. by the end of the day, the Dow was down to over 785, the NASDAQ was down over 268, and the S&P 500 was down over 86. Ten-year Treasurys fell below 1% for the first time ever as investors shift into safer assets.
Ninety-one people in several states now have the virus. It’s highly contagious and six have died. All of the deceased had underlying conditions. Forty-eight who have the disease were repatriated. Most caught the disease abroad.