Could coronavirus force a rate cut?

by Ryan Smith03 Mar 2020

The coronavirus outbreak may force the Federal Reserve to cut interest rates soon, market watchers predict.

There is a growing belief among economists that central banks around the globe, including the Fed, will have to cut rates soon to avoid a financial crisis precipitated by the outbreak, according to a MarketWatch report.

On Sunday, Goldman Sachs economists predicted that the Fed would cut rates soon – possibly prior to its next policy meeting scheduled for March 17-18. Goldman Sachs economists Jan Hatzius and Daan Struyven said in a note that they expected to cut interest rates by 50 basis points at or before the scheduled meeting, and another 50 basis points in the second quarter.

President Donald Trump, who has repeatedly hammered Fed Chairman Jerome Powell for not cutting rates often or steeply enough to suit him, was back on the warpath Monday, taking to Twitter to once again push for a rate cut.

“As usual, Jay Powell and the Federal Reserve are slow to act,” Trump tweeted. “Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate. We don’t, putting us at a competitive disadvantage. We should be leading, not following!”

Powell said Friday that the Fed is “closely monitoring” the coronavirus outbreak and that the central bank would “act as appropriate to support the economy.”