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Investors Ask the Fed to Cut Rates Because of the Coronavirus Even Though They Just Did

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Investors Ask the Fed to Cut Rates Because of the Coronavirus Even Though They Just Did

Business Insider has recently reported that markets are asking for lower interest rates even after the Fed “handed down an emergency half-point cut on Tuesday to combat coronavirus’ potential impact on the U.S. economy.” The central bank has slashed interest rates by a half percentage point in an effort to fight the potential impact of the outbreak on the U.S. economy.

However, markets did not have a positive reaction. Stocks continued to go down and investors rushed into safe-haven assets.

The report added that “yields on both the 10- and 30-year US Treasury bonds fell to record lows, a sign that the market still thinks fiscal policy is too tight. Traders are betting that the Fed lowers rates even further at its next meeting March 17-18. As many as 78% of traders think the Fed will cut another 50 basis points, while nearly 22% think there will be a 25-basis-point cut in March, according to CME’s FedWatch tool.”

Investors need to take a step back, according to Michael Arone, chief investment strategist at State Street Global Advisors. “If you look at the past times the Fed has done emergency rate cuts, they’ve been in response to crises like the bursting of the tech-stock bubble, the Sept. 11 terrorist attacks, and the 2008 financial crisis,” said a Barrons report.



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