Acknowledging the “evolving risks” that the coronavirus outbreak poses to the U.S. economy, the Federal Open Market Committee unanimously voted to cut the target range for the federal funds rate by 50 basis points to a range of 1% to 1.25%. This is the first emergency rate cut the FOMC has made since 2008.
The committee said it would closely monitor the situation as it develops and “will use its tools and act as appropriate to support the economy” in the days ahead. In a press conference, Federal Reserve Chairman Jerome Powell emphasized that the underlying fundamentals of the economy remain strong. “Financial markets are functioning in an orderly manner,” he said, adding that “supervisors will be working with banks to ensure that they work with their borrowers” that may be struggling as a result of the outbreak.
While “the situation remains a fluid one,” Powell emphasized that “the U.S. economy is strong and we will get to the other side of this. I fully expect that we’ll return to solid growth and a solid labor market.”