Emergency interest rate cut by Federal Reserve of 50 basis points

Mar 3, 2020

The Federal Reserve have just made their first emergency move since the financial crisis by cutting US interest rates by 0.5%.

They said the Coronavirus poses evolving risks and their vote was unanimous. The statement said they’re “closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”

The move has led to some weakening of the USD, particularly against the Euro which has touched 1.1200 (EUR/USD). The GBP/USD reaction has been relatively muted so far with a 0.5% bounce.

The market had already been pricing in more rate cuts from the Fed and with this large emergency cut there’s scope for another one at their 18th March meeting. It will be interesting to see how the markets react to this and it should prove to be a test of the Fed’s power over the market. The Fed chairman is due to speak in the next 5 mins at his press conference.