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Fed Cuts Rates Half Point in Emergency Move Amid Spreading Virus (bloomberg.com) 145

Posted by msmash from the breaking-news dept.
The U.S. Federal Reserve delivered an emergency half-percentage point interest rate cut Tuesday in a bid to protect the longest-ever economic expansion from the spreading coronavirus. From a report: "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 1/2 percentage point." U.S. stocks briefly reversed earlier declines before resuming their selloff, while the 10-year Treasury yield touched 1.09%. Fed funds futures are pricing more than a percentage point of central bank rate reductions for 2020, including another quarter-point cut in the first half of the year. 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."
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Fed Cuts Rates Half Point in Emergency Move Amid Spreading Virus More

Fed Cuts Rates Half Point in Emergency Move Amid Spreading Virus

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  • This is what made America great (Score:5, Insightful)

    by Opportunist ( 166417 ) on Tuesday March 03, 2020 @11:31AM (#59791812)

    There's a pandemic brewing, we can't test people to see whether they're infectious, but we can make sure that the economy won't have to suffer like the people.

    Priorities are important!

    • Just what we need during an epidemic. (Score:5, Insightful)

      by Anonymous Coward on Tuesday March 03, 2020 @11:36AM (#59791846)

      So, instead of letting the market cool down and economic activity slow, the Fed is going to juice the market and try to force us into increased economy activity.

      The more money people spend, the more goods and people end up moving around. That makes it easier for the viruses to spread. The CDC has failed to test and isolate coronavirus, and now the Fed is working to help it proliferate. Can the gov't get any more incompetent?

    • Just following WHOs advice.

      Economy First!

    • The Fed continually cutting rates and keeping them low has probably done more harm to the economy than any actual good that they might have intended. Market corrections suck, but humans thinking they're wise enough to intervene in a way that not only produces their intended outcome, but also does so without unwanted side effects are far worse.

      • Re: (Score:2)

        by NFN_NLN ( 633283 )

        Ironically...

        > Market corrections suck, but humans thinking they're wise enough to intervene in a way that not only produces their intended outcome, but also does so without unwanted side effects are far worse.

        *Viruses* suck, but humans thinking they're wise enough to intervene in a way that not only produces their intended outcome, but also does so without unwanted side effects are far worse.

        (Let the virus play out...)

        • *Viruses* suck, but humans thinking they're wise enough to intervene in a way that not only produces their intended outcome, but also does so without unwanted side effects are far worse. (Let the virus play out...)

          I realize you're trying to make a point, but look at how humans have essentially created antibiotic resistant bacteria and a fear that they could wipe out much of the population under the right conditions. I think this shows why your analogy doesn't look as good even ignoring the other problems with it.

          Comparing two complex systems is fine, but you're ignoring that one is a biological system where microorganisms behave in a particular way and the other is a system formed of rational actors that attempt t

    • Re:This is what made America great (Score:5, Insightful)

      by hey! ( 33014 ) on Tuesday March 03, 2020 @12:10PM (#59792008) Homepage Journal

      When the economy suffers, the rich may see their portfolios shrink, but it's the poor who lose their homes.

      • The poor won't be affect nearly as much by interest rates as they are by outbreaks.
        • when the rich suffer they take it out of the working class' hide in the form of layoffs and paycuts.

          If we still had strong worker protections and Unions yeah, but we gave those up. It's not clear what we got in exchange, but now everytime the markets take a hit there's a round of stock buybacks funded by layoffs and longer hours with increased productivity.
      • Actually, recessions tend to have a leveling effect between rich and poor.

    • Re: (Score:3, Interesting)

      by ceoyoyo ( 59147 )

      You can't make any tests, deliver them, or administer them without economic activity. "The economy" is what people do.

      • Re: (Score:2)

        by barakn ( 641218 )

        So you're saying the tests wouldn't be possible without the Fed lowering rates?

        • Re: (Score:2)

          by ceoyoyo ( 59147 )

          Not necessarily, but also, possibly. A short term rate cut can allow businesses to borrow money to tide them over in an emergency. Usually that's most applicable to banks, but banks going bust trickles down and affects everyone. Remember last time?

          The point is that a functioning economy is what enables all our modern conveniences, including disaster response. Without it, we're just a bunch of monkeys running around trying our best to fend for ourselves. The reason the US sent medical aid to Sierra Leone dur

    • Unlikely to be a problem exclusive to America.

      I'm pretty sure the potential economic impact factored into China's early decisions to try and keep things quiet.

      • Same with the ridiculous over-reaction (50 million quarantined?)

        They had to worry about being shut off from exports, which, in the larger trade war context, is punishment lying on the ground waiting to be picked up by other countries.

    • The economy suffering leads to businesses closing. People who lose their jobs also lose their health insurance, etc.. The economy shouldn't be the highest priority, but it's still important.

    • A virus with a 2% death rate is not capable of becoming pandemic.

      And I rather doubt even a 0% interest rate can protect the economic from a pandemic- and one will come, eventually.

      • Re:This is what made America great (Score:4, Informative)

        by tsqr ( 808554 ) on Tuesday March 03, 2020 @02:30PM (#59792670)

        A virus with a 2% death rate is not capable of becoming pandemic.

        And I rather doubt even a 0% interest rate can protect the economic from a pandemic- and one will come, eventually.

        Whether or not an infectious disease can become pandemic has nothing to do with its death rate, and everything to do with its level of infectiousness. As far as the interest rate is concerned, I think that's more about mitigation than prevention.

    • There's a pandemic brewing, we can't test people to see whether they're infectious, but we can make sure that the economy won't have to suffer like the people.

      Priorities are important!

      Well, trying to keep both as healthy as possible are not mutually exclusive events and activities.

      If the economy goes tits up....we're likely having much MORE devastation to the US than this virus which while deadly, isn't appearing to be THAN deadly.

      Let the economy falter, and all of a sudden, medicines, food, stops bein

    • More like all the corrupt figures on Wall Street see an opportunity with the Corona virus scare to do a stock market dump and give an excuse for the feds to reduce rates (which makes them more money and fucks everyone else in the country).

      • More like all the corrupt figures on Wall Street see an opportunity with the Corona virus scare to do a stock market dump

        You don't have to be corrupt to see that with China nearly shutting down, and with the rest of the worlds companies and economies tied to it.....that you might want to sell off some of your holdings that have been making a lot of $$ this past decade + and bank some of the profits you've made.

        There's a lot of folks with 401K's...that I'll bet those filks hope their accounts have manage

    • Hey, they are just making sure the coronavirus has the same access to capital as everyone else!

  • Keynsians (Score:5, Funny)

    by Tim Hamilton ( 5961502 ) on Tuesday March 03, 2020 @11:31AM (#59791814)
    Like trying to do eye surgery for everyone in a city using nothing but a bulldozer while getting in a fistfight with other operators on how to start the engine of the bulldozer.

    • Re:Keynsians (Score:5, Funny)

      by BeerFartMoron ( 624900 ) on Tuesday March 03, 2020 @12:00PM (#59791962)

      Like trying to do eye surgery for everyone in a city using nothing but a bulldozer while getting in a fistfight with other operators on how to start the engine of the bulldozer.

      Oh, this is much more desperate. This is like trying to stop a viral pandemic by manipulating the securities industry. But if it gets you re-elected, then why not, eh?

      Personally, I think we'd be better off attaching leeches to bankers.

      • I wish I could add an insightful mod, especially about the leeches.

        My question is about where the "value" is supposed to be. I have two primary theories:

        (1) Circular trading among computers. The same shares circulate among computers A, B, C... with the prices rising in each round. No value created anywhere, but apparently YUGE profits that easily pay for the interest as more and more money is borrowed to keep inflating the bubble.

        (2) Corporate stock buybacks, the ultimate form of insider trading. Who knows

    • Re:Keynsians (Score:5, Insightful)

      by RazorSharp ( 1418697 ) on Tuesday March 03, 2020 @12:02PM (#59791974)

      I don't see how your analogy fits. Furthermore, you don't make it clear what economic theory you favor as opposed to Keynes'. It was Keynesian economics that helped the world survive the Great Depression, just as it was Keynesian economics that prevented the Great Recession from becoming a depression.

      The only problem with Keynesian economics is that politicians only adhere to Keynesian principles to fix things when they break rather than to prevent them from breaking. We've been long overdue for tax increases and increased interest rates but instead we cut taxes and pushed interest rates as low as possible. Because constituents for the most part don't understand how economics works, no one is willing to tolerate politicians tightening the belt when things are doing well. Recessions are always preceded by an excess of confidence and politicians acting like this one time, unlike any other time, expansion will continue indefinitely.

      Please, point out some non-Keynesian system that has worked to maintain economic stability and has corrected economic downturns. It's never happened. Supply-side policies create the messes that Keynesian policies clean up.

    • Comment removed based on user account deletion
      • Comment removed based on user account deletion

        • I still think Slashdot needs an edit button.

          Helllllll no. Do. Not. Want.

          I don't want people playing games with what they've already put out there. It's like censorship. You'll get the bad with the good.

          I mean, I'd love an edit button, but not at that price.

        • I still think Slashdot needs an edit button. It hasn't harmed any site with one, and it'll make it a lot easier to prevent people focusing on irrelevant mistakes than on actual substantive discussion.

          Or you might "prevent" errors by resisting an impulse to finish with minimal consideration because that's what a Preview button is: An editing procedure. Many writers prescribe staggering proofreads by briefly focusing attention to a wholly different kind of task, or just another composition, for only a minute or so.

  • Disappointing (Score:5, Insightful)

    by fahrbot-bot ( 874524 ) on Tuesday March 03, 2020 @11:43AM (#59791872)

    Left alone, the market(s) will recover on their own. Investors, and/or the Administration, couldn't tough it out for a few days or so -- seriously? (I say this as someone with investments who saw his net worth drop 6.5% in the last week of February.) Is a temporary dip (putting it mildly) in the Dow, NASDAQ and S&P really that overwhelmingly worrisome, especially as one of the causes seems to be a global (almost) pandemic killing thousands of people. Show some backbone Wall Street.

    • My net worth dropped about 20% last week. Yesterday about half of the drop recovered. Was not stressed about the market.

      But, an emergency short term rate cut might actually be avoid idea to help industries that could/will have existential impacts in the short term. But, doing so is obviously fraught with significant risks.

      • Re: (Score:3, Insightful)

        by DogDude ( 805747 )
        My industry (retail) works heavily with China. We didn't need a rate cut. This is just going to be a short term blip with deliveries, which happens all of the time for all different reasons. We need a rate hike so we can earn some rate of return on our cash.

        • As you allude, retail is not impacted in a major way, which is why the rate cut would not help them. Many tourism related industries will see an unrecoverable loss though. Others may do well to invest to diversify their supply chain more. These industries could benefit from the rate reduction.

      • It will correct itself.

        At some point the Fed will raise the rate back up and the markets will re-adjust to it like they always do.

    • The current administration will live or die by how people perceive the economy. Actual economic indicators are pretty bad. Debts high, wages are low, 33% of Americans are in the "Gig" economy and Ars Tecnica just ran a lovely piece about how companies are increasingly relying on contractors to save money, resulting in extremely unstable work conditions.

      The economy is living off folks feelings right now, much more than usual. That means it wouldn't take much more than a stiff wind to crash it, and if tha

      • "The current administration will live or die by how people perceive the economy."

        Not any more. People aren't going to blame Trump for the Wuhan virus disrupting Chinese supply lines and crashing the markets. At least normal people won't blame him. This was entirely predictable almost two months ago when China began quarantining tens of millions of people. It was also obvious that it would spread here and cause economic slowdown. If anything this was a huge gift for Trump. A market correction that he's

      • " ALL ADMINISTRATIONS will live or die by how people perceive the economy. "

        I fixed that for you :P

    • This is an election year! We need to do whatever it takes to keep the markets propped up until November!

      • Don't use that lame excuse. It's good practice and nothing to do with the fact that the year is arbitrarily divisible by 3 with a remainder of 1.

    • Re: (Score:2)

      by ftobin ( 48814 )

      You're complaining that people are actually putting their money where their mouth is? That people with actual money on the line are acting on it?

      If you're so contrary to the market, put your money where your mouth is, and buy a whole bunch of short term calls on the market. After all, it's just a few days, right?

  • "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 1/2 percentage point."

    FOMC decided or they gave in to pressure? Interesting timing

    Trump asks Fed for ‘big cut’ after Australia slashes rates on coronavirus impact [cnbc.com]. Trump gets rate cut a few hours later.

    But that 50 basis point cut wasn't enough. Trump wants more [cnbc.com].

    • Re:Decided? (Score:4, Funny)

      by DogDude ( 805747 ) on Tuesday March 03, 2020 @11:54AM (#59791924)
      The Fed is doing what Donnie Dipshit tells them to do because they know they'll get fired if they don't, and Congress won't stop King Orange.

      • Re:Decided? (Score:5, Informative)

        by alvinrod ( 889928 ) on Tuesday March 03, 2020 @12:12PM (#59792020)
        The chairman of the Federal Reserve can't be fired by the President. The current chairman was also originally nominated for and appointed to the board of governors under Obama, so I don't see how you could believe he's some kind of Trump stooge either.
        • Not true. Chairman Powell was nominated and put in office by Trump. He can be removed by Congress for "good cause", and we've seen the Republican congress does whatever Trump says.

          • He can be removed by Congress for "good cause", and we've seen the Republican congress does whatever Trump says.

            We don't have a Republican Congress, we have a Republican-controlled Senate and a Democrat-controlled House.

            Regardless, the President himself can remove the Chairman of the Federal Reserve for "Good Cause" [forbes.com] - he doesn't need Congress' cooperation to do so. I suppose if he did so without actually having "good cause", Congress could stop him by impeaching and convicting him... but we already know the latter won't happen, no matter what he does.

          • So in other words he can't be fired by the President. That he was nominated to serve as the chairman from the existing members of the board of governors is immaterial. If the congress were doing everything that Trump wanted there wouldn't be two vacancies on the board of governors right now because the nominations that Trump had made previously should have already been pushed through.

        • The chairman of the Federal Reserve can't be fired by the President.

          They can actually. But it is governed by statute (which of course could also be ignored, with the paper tiger threat of impeachment as consequence) to be limited to "good cause"

          The current chairman was also originally nominated for and appointed to the board of governors under Obama

          Negative. You're thinking of Janet Yellen, who hasn't been President of the Fed since her term ended in 2018.
          Jerome Powell was appointed by Trump.
          He doesn't appear to be a trump "stooge", and in general had pretty solid beliefs on monetary policy.. But he does appear weak to criticism from Trump.
          I've been watching intently to see

  • Something tells me that those multi-national organizations like Airlines and Hotel chains that have a big exposure in Coronavirus infected regions like China are going to need a lot more than a 50 basis point rate cut to keep them out of economic trouble.

    That said, I doubt that we're going to be seeing much inflation right now outside of things like emergency medical supplies.

    • Not just multi-national organizations. Local businesses and service industry folks are going to be hit hard. How many people will be going to restauarants, the movies, stores or tourist spots in the next few months?

  • A Nation of Winners (Score:3)

    by buravirgil ( 137856 ) <buravirgil@gmail.com> on Tuesday March 03, 2020 @11:59AM (#59791954)
    99 Homes
    https://www.imdb.com/title/tt2... [imdb.com]

    Carver (Michael Shannon):What did you think it would mean working for me?
    Nash (Andrew Garfield):I just thought
    Carver: No, you didn’t. Nobody does. Because who in their right mind wouldn’t rather put someone in a home than drag them out of it? Up until three years ago, I was a regular old real-estate agent. Putting people in homes, speculating on properties, that was my job.

    Now, in 2006, Robert and Juliet Tanner borrowed $30,000 to put an enclosed patio on their home that they had somehow managed to live without for 25 years. Why don’t you ask them about that when they’re spitting in your face while you’re walking them to the curb. Why don’t you ask the bank what the hell they were thinking giving these people an adjustable rate mortgage and then you can go to the government and ask them why they lifted every regulation and sat there like a retarded step-child. You, the Tanners, the banks, Washington, every other home owner and investor from here to China turned my life into evictions.

    I’m not an aristocrat. I wasn’t born into this. My daddy was a roofer. Okay? I grew up on construction sites watching him bust his ass until he fell off a town house one day. A lifetime of insurance payments, and they dropped him, before he could buy a wheel-chair, but only after they got him hooked on pain killers. Now, do you think I’m going to let that happen to me? You think America 2010 gives a flying rat’s ass about us?

    America doesn’t bail out the losers. America was built by bailing out the winners. By rigging a nation of the winners, for the winners, by the winners. You go to church? Only one in a hundred is going to get on that ark son. And every other poor soul is going to drown. I’m not going to drown.

  • Cut the interest rates (Score:4, Insightful)

    by 140Mandak262Jamuna ( 970587 ) on Tuesday March 03, 2020 @12:02PM (#59791976) Journal
    That way the seniors who live on fixed income from CDs and deposits will have less income, they may not be able to buy food or medicine. Sooner they die better it is for the all important job creators corporations.

    • Re: (Score:2)

      by PPH ( 736903 )

      fixed income from CDs

      Which, by definition, are fixed. So no. You don't have less income. You do however have an asset whose price just went up. Should you sell it, those money-grubbing bastards in DC will be more than happy to take their cut of your capital gains. Don't sell and you are OK. Until they find some way to impute the gains and bill you for tax on that amount..

      • All the fixed income securities have fixed duration. Seniors whose CDs and fixed deposits are maturing now will get less interest for the next five years. Even if the rates go up, their low return is locked in for the next five years.

        Wall Street steals more money from seniors than any tax man you rail against. Tax is the side show, part of the smoke and mirrors used by Wall Street to keep you distracted. Keep stealing from the people long enough, people will vote for socialism and nationalize wall street.

  • The objectives as mandated by the Congress in the Federal Reserve Act are promoting (1) maximum employment, which means all Americans that want to work are gainfully employed, and (2) stable prices for the goods and services we all purchase. In this way, the Fed’s monetary policy decisions truly affect the financial lives of all Americans—not just the spending decisions we make as consumers, but also the spending decisions of businesses—about what they produce, how many workers they employ

  • Great conceren (Score:3)

    by Pollux ( 102520 ) <speter AT tedata DOT net DOT eg> on Tuesday March 03, 2020 @12:20PM (#59792052) Journal

    Never in my years have I ever seen a president twice tell the Fed to lower the interest rate [cnbc.com], and the Fed actually did exactly that within a week of the request.

    It's a dangerous time, that the executive branch has this much influence over monetary policy. Especially considering that head of our Executive Branch has had his hotels and casinos declare bankruptcy six times in his lifetime.

    • Re:Great conceren (Score:4, Insightful)

      by 93 Escort Wagon ( 326346 ) on Tuesday March 03, 2020 @12:56PM (#59792220)

      People see what they choose to see. Apparently you didn't see the Fed raise rates several times over the past year and a half while Trump whined about it.

      The Fed is trying to do the best they can to manage the money supply, despite the attempts at interference from the guy with the bizarre tan. And frankly, past presidents and past congresses haven't exactly been blameless either. They may not have made public statements about the Fed itself, but they're the ones who allowed the banks free reign to do pretty much whatever they wanted - which caused the 2008 crash.

      • The Fed is trying to do the best they can to manage the money supply, despite the attempts at interference from the guy with the bizarre tan

        That's been my take on it as well.

        I am beginning to worry about whether or not Powell has the stones to continue acting independently though. It's getting harder to tell.

    • Never in my years have I ever seen a president twice tell the Fed to lower the interest rate [cnbc.com], and the Fed actually did exactly that within a week of the request.

      I know. Somehow the president's request and the market aligning amidst a market drop that is affected by a fast developing pandemic means that we have a government conspiracy on our hands.

  • So rich people get more free money... (Score:5, Insightful)

    by AmazingRuss ( 555076 ) on Tuesday March 03, 2020 @12:30PM (#59792100)
    ... to buy up necessities like housing, then cheaply hold it off the market to restrict supply and drive the price up, guaranteeing profit, at least until the last prole is drained dry.

    Business as usual.

    • Absolutely. (Score:4, Informative)

      by DogDude ( 805747 ) on Tuesday March 03, 2020 @02:13PM (#59792588)
      I'm not rich, but real estate is the only thing I have to invest in that keeps up with inflation that doesn't involve gambling. So yes, these interest rates will force me to borrow more to buy more real estate. And yes, it absolutely drives the prices up.
      • People can afford a payment. To use simple numbers, a $100,000 10 year mortgage would be $919.76. An $87,000 10 year mortgage would be $920.59.

        If all people have is $920 per month, home prices will drop to reflect this.

        • Re: (Score:2)

          by DogDude ( 805747 )
          No. Because investors like me will buy up those homes with cash that we have nowhere else to safely invest. In my town, you cannot buy a house/condo at all if your offer isn't cash. People needing mortgages are already priced out of our town.

  • And now you're out of ammo.

    And tests.

    Way to go.

    • Out of Ammo? LOL

      They own the printing press, they are NOT out of ammo unless they cannot find enough paper and ink. It's a process called Quantitative Easing and it's been in heavy use for more than a decade, allowing the government to buy it's own Bonds by printing money to pay for them. How do you think the Social Security Trust Fund stays solvent?

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