In a surprise move, the Federal Reserve
cut its benchmark interest rate by a sizable
half-percentage point Tuesday in an effort
to support the economy in the face of the
spreading coronavirus.
Chairman Jerome Powell said at a news
conference that the virus “will surely weigh on
economic activity both here and abroad for
some time.”
It was the Fed’s first move since last year, when
it reduced its key short-term rate three times. It’s
also the first time it’s cut rates between policy
meetings since the 2008 financial crisis, and it is
the largest rate cut since then.
The Dow Jones Industrial Average, which had
been down as much as 356 points shortly before
the Fed’s announcement, initially jumped on
the news. The surge was short-lived. By late
afternoon, the Dow had tumbled more than
600 points in a sign of nagging worries about
economic damage from the virus. Still, on
Monday, the Dow had rocketed up nearly 1,300
points — its largest percentage gain since 2009.
The yield on the 10-year Treasury note briefly fell
below 1% for the first time ever. Investors around
the world bid up bond prices — which move in
the opposite direction of yields — as they sought
safety from the stock market’s turmoil.
The fear that coursed through financial markets
after the Fed’s announcement underscored
the worry that there are limitations to what the
Fed and other central banks can do to resolve a
crisis of this kind. Powell acknowledged as much
when he observed that the “ultimate solutionImage: Jacquelyn Martin