Tuesday, March 3, 2020

NYT on Fed

Fed Slashes Interest Rates as Coronavirus Fears Mount - The New York Times

Fed Slashes Interest Rates as Coronavirus Fears Mount

The central bank said it would cut interest rates by half a percentage point.

Credit...John Taggart for The New York Times

The Federal Reserve slashed interest rates on Tuesday as fears about the economic fallout of the coronavirus mounted.

“The coronavirus poses evolving risks to economic activity,” the Fed said in a statement. “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.”

The statement on the vote, which was unanimous, also pledged that the Fed “is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”

Rates are now set in a range of 1 percent to 1.5 percent, as of the decision.

Stocks in the United States rallied after the Fed said it would cut interest rates. After opening lower at the start of trading, the S&P 500 spiked more than 1 percent immediately after the cut was announced.

The move underlines what a fraught moment economic policymakers in the United States and around the world currently face. Coronavirus has torn across the globe, sickening about 90,000 people. While the vast majority of those are still in China, where the infections first surfaced, major outbreaks have also taken hold in South Korea, Japan, Iran and Italy, and cases are climbing in other countries.

The virus could exact a heavy economic toll, as it leads to quarantines, shutters factories, and hits investor and consumer confidence.

Stocks bled through their worst losses since 2008 last week, but rebounded Monday as expectations for action from the central bank climbed.

While the Fed can bolster confidence and help to keep borrowing cheap, there are questions about how effective rate cuts will be in counteracting the fallout from the virus. Central banks cannot keep the disease from spreading, prevent workers from losing hours at work, or mend broken supply chains amid factory delays.

President Trump, who has no control over monetary policy, has been urging the Fed to lower interest rates when asked about the virus’ potential economic fallout.

“As usual, Jay Powell and the Federal Reserve are slow to act,” he wrote on Twitter Monday, referring to the chair of the Federal Reserve.

The Coronavirus Outbreak

  • Answers to your most common questions:

    Updated March 2, 2020

    • What is a coronavirus?
      It is a novel virus named for the crownlike spikes that protrude from its surface. The coronavirus can infect both animals and people and can cause a range of respiratory illnesses from the common cold to lung lesions and pneumonia.
    • How contagious is the virus?
      It seems to spread very easily from person to person, especially in homes, hospitals and other confined spaces. The pathogen can travel through the air, enveloped in tiny respiratory droplets that are produced when a sick person breathes, talks, coughs or sneezes.
    • Where has the virus spread?
      The virus, which originated in Wuhan, China, has sickened more than 89,700 in at least 67 countries and more than 3,000 have died. The spread has slowed in China, but is picking up speed in Europe and the United States.
    • What symptoms should I look out for?
      Symptoms, which can take between two to 14 days to appear, include fever, cough and difficulty breathing or shortness of breath. Milder cases may resemble the flu or a bad cold, but people may be able to pass on the virus even before they develop symptoms.
    • What if I’m traveling?
      The C.D.C. has advised against all non-essential travel to South Korea, China, Italy and Iran. And the agency has warned older and at-risk travelers to avoid Japan.
    • How long will it take to develop a treatment or vaccine?
      Several drugs are being tested, and some initial findings are expected soon. A vaccine to stop the spread is still at least a year away.
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