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.