New York (CNN Business)The stock market — and President Trump — really wanted the Federal Reserve to cut interest rates as soon as possible because of concerns about coronavirus. Everybody got their wish.
The Fed blinked Tuesday morning, slashing interest rates by a half of a percentage point in an emergency rate cut.
The timing of the cut is a bit surprising considering that Fed chair Jerome Powell and US Treasury Secretary Steven Mnuchin said just a few hours earlier the US and other G7 nations were prepared to take action but stopped short of saying something was imminent. And the Fed has a regularly scheduled policy meeting in just a little more than two weeks.
But experts said Tuesday that the Fed had to act now. It was the only way to reassure investors the central bank was taking the threat seriously.
“The Fed could not ignore that there would be a real economic impact from the coronavirus,” said Tony Fratto, a partner at Hamilton Place Strategies and former Treasury Assistant Secretary for Public Affairs in George W. Bush’s administration.
“For the Fed to do that and wait until the next policy meeting would not be credible. Things are moving too quickly,” he added.
Fratto said the onus is now on health authorities, Congress and the White House to “step up” and follow the Fed’s lead. More urgent action is needed to ensure the coronavirus does not spread and that proper funding is in place to handle the crisis, he added.