WASHINGTON (Reuters) – The U.S. Federal Reserve cut interest rates on Tuesday in a bid to shield the world’s largest economy from the impact of the coronavirus, but the emergency move failed to comfort U.S. financial markets roiled by fears of a deep and lasting slowdown.
Indeed, though Fed Chair Jerome Powell reiterated his view that the U.S. economy remains strong, he acknowledged that the spread of the virus had caused a material change in the U.S. central bank’s outlook for growth.
The virus causes respiratory illness that has been fatal in an estimated 2% of cases, and governments and companies have shut schools and restricted travel and large gatherings in response, crimping factory output in China where the outbreak began and disrupting production of goods worldwide.
“The virus and the measures that are being taken to contain it will surely weigh on economic activity, both here and abroad, for some time,” Powell said in a news conference shortly after the central bank said it was cutting rates by a half percentage point to a target range of 1.00% to 1.25%.
“We’ve come to the view now that it is time to act in support of the economy,” he said. “I do know that the U.S. economy is strong and we will get to the other side of this; I fully expect that we will return to solid growth and a solid labor market as well.”
Still he acknowledged the outlook is uncertain and the situation “fluid.”
The decision was unanimous among policymakers. It was the first rate cut outside of a regularly scheduled policymaker meeting since 2008 a