New York (CNN Business)The Federal Reserve slashed interest rates by half a percentage point on Tuesday, a bold attempt to give the US economy a jolt in the face of concerns about the coronavirus outbreak.
It was the first unscheduled, emergency rate cut since 2008, and it also marks the biggest one-time cut since then. The new benchmark interest rate is 1% to 1.25%.
Although the fundamentals of the US economy remain strong, “the coronavirus poses evolving risks to economic activity,” the central bank said in a statement.
Just last week, several Fed officials said it was too early to cut rates in the face of the global virus outbreak. Fed Chairman Jerome Powell released a statement on Friday saying the central bank would act as appropriate. The G7 released a similar message Tuesday morning.
Investors remained hopeful that the Fed would interject, however. Market expectations for a half-percentage point cut during the March 18 Fed meeting were 100% as of Tuesday morning.
“With financial markets in turmoil and evidence growing that the coronavirus is developing into a pandemic, the Fed’s change of heart is entirely understandable, wrote Paul Ashworth, chief US economist at Capital Economics.
But the emergency cut also signals that the outlook for the US economy might have been in more jeopardy than previously thought. The US stock market struggled for direction as it balanced the economic stimulus of the rate cut with the stateme