Fed cuts rate by half point in urgent move

Washington

THE US Federal Reserve delivered an emergency half-percentage point interest rate cut on Tuesday in a bid to shield the country's longest-ever economic expansion from the spreading novel coronavirus.

"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 by half a percentage point." It was a unanimous vote for the emergency cut to a range of 1 to 1.25 per cent. The Fed had reduced the rate three times in 2019 totalling 75 basis points.

Wall Street stocks rose after the Fed action. At 1505 GMT, the Dow Jones was at 27,040.74, up 1.3 per cent. But there was no runaway surge with the Fed action widely expected by the markets. The S&P 500 gained 1.4 per cent to 3,133.37.

The central bank also said it is "closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy."

The Fed, which said in the statement that the "fundamentals of the US economy remain strong", acted hours after its chairman Jerome Powell and finance chiefs from the Group of Seven nations said they would "use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks." BLOOMBERG, AFP