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Federal Reserve cuts rates to zero
Published on: 2020-03-16
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After weeks of turmoil over the economic toll of the coronavirus U.S. stock indexes entered a bear market signaling an end to their 11 year winning streakAfter weeks of turmoil over the economic toll of the coronavirus, U.S. stock indexes entered a bear market, signaling an end to their 11-year winning streak

In a bold, emergency action to support the economy during the coronavirus pandemic, the Federal Reserve on Sunday announced it would cut its target interest rate near zero.

The swifter-than-expected rate cut is designed to prevent the kind of credit crunch and financial market disruptions that occurred the last time the Fed had to cut rates all the way to the bottom, during the global financial crisis just over a decade ago.

rateThe Fed's board of governors had been set to meet this week and report on the results of its meeting on Wednesday. Central bankers were widely expected to cut rates to zero at that meeting, after they slashed rates to a half a percentage point in another emergency cut on March 3. Sunday's latest emergency action suggests the Fed believed the cogs of the US economic machine were getting gummed up, and it was concerned that waiting even three more days could be too late to prop up the economy. The Fed will no longer meet later this week.

"I don't think they would have done this unless they felt the financial markets were at significant risk of freezing up tomorrow," said Mark Zandi, chief economist at Moody's. "They're very concerned the financial markets won't work."

Traders listen at the New York Stock Exchange to US President Donald Trumps televised speech from the White HouseTraders listen at the New York Stock Exchange to US President Donald Trump's televised speech from the White House

The US stock market tumbled into a bear market this past week -- the first in 11 years -- as investors grew concerned the global economy could stumble into a steep recession as people quarantine themselves at home and the daily motions of normal life around the world come to a screeching halt. Stock futures plummeted again Sunday night.

rate2Federal Reserve Chairman Jerome Powell said in a press conference that those measures will have "significant effect on economic activity in near term" and will restrain economic activity in foreign economies. He said he expects the US economy will suffer as a result next quarter, although he declined to predict a recession or the future of the economy. He said much of that depends on how widely the disease spreads.

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