The Federal Reserve made an emergency cut in interest rates after officials saw the coronavirus was having a material impact on the economic outlook, Chairman Jerome Powell said Tuesday.

Powell held a news conference following the central bank’s decision to cut overnight interest rates by half a percentage point. He said the Fed “saw a risk to the economy and chose to act.” 

“The magnitude and persistence of the overall effect on the U.S. economy remain highly uncertain and the situation remains a fluid one,” he said. “Against this background, the committee judged that the risks to the U.S. outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy.”

The move took the Fed’s benchmark rate to a target range between 1%-1.25% and was the first intermeeting action since December 2008, during the financial crisis.

Markets had been volatile through the morning and fell sharply as Powell spoke.

He said the Fed would continue to watch the coronavirus spread and would adjust policy accordingly, though he indicated that response would come in the form of rate cuts rather than additional asset purchases, or quantitative easing.

Asked whether officials are considering using other tools, Powell said, “In the current context, no. What we discussed, the current stance of policy, is it appropriate? We came to the view that it was appropriate to make changes and went ahead and did that today.”

At its most recent meeting in January, the committee held the line on rates and indicated that current policy would be appropriate so long as the economy remained on its growth trajectory. Multiple Fed officials have spoken since then and said they remain confident in growth and would continue to monitor the virus and its impact.

Powell said signs that the virus spread had caused committee members to change their outlook.

“For us, what really matters of course is not the epidemiology but the risks to the economy,” he said. “So we saw a risk to the economy and chose to act.”

The G-7 released a statement earlier in the day pledging its support to impacted countries. Powell said officials from the nations will continue to work in tandem to combat economic effects.

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