Coronavirus emergency move! US Federal Reserve cuts interest rates; experts surprised

The U.S. Federal Reserve cut interest rates on Tuesday in an emergency move designed to shield the world's largest economy from the impact of the coronavirus. In a statement, the central bank said it was cutting rates by a half percentage point to a target range of 1.00 pct to 1.25 pct.

"The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. 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," the Fed said a statement.

The decision was unanimous among policymakers. The Fed`s decision to cut interest rates before its next scheduled policy meeting on March 17-18 reflects the urgency with which the Fed feels it needs to act in order to prevent the possibility of a global recession.

HIGHLIGHTS:
STOCKS: The S&P 500 jumped, then turned lower again and was last off 0.32%

BONDS: The 10-year U.S. Treasury note yield, spiked then turned lower was last at 1.0897%; The 2-year note yield fell to 0.7662%

FOREX: The US dollar index was down almost half a percent

Expert Views: Fed announces surprise rate cut to counter coronavirus impact

“It seems like an odd time to do it after yesterday’s bounce. It doesn’t do anything for the economy, but I think it probably helps the markets. The import of it is a messaging that we are in control and maybe everyone should settle down. The risk is the market shrugs it off,” ​Willie Delwiche, Investment Strategist at BAIRD in Milwaukee said.

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“I’m a little surprised. I didn’t expect that at 10 O’clock today, I thought you’d see something coordinated among central banks. The biggest takeaway from here is the steepening of the curve, the 2s/10s jumped almost 7 basis points. It’s a big, big steepening here… I’m surprised that it`s today. I’m not surprised that they went, but I thought it would be more of a coordinated and not out of the blue at 10 O’clock,” Justin Lederer, Interest Rate Strategist, Cantor Fitzgerald, New York.