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Fed slashes rate by half a percentage point

In an emergency move amid spreading Coronavirus.
Virus moves Fed to act. Photographer: Andrew Harrer/Bloomberg

The US 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.

“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 surged after the cut was announced.

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.”

The vote for the emergency cut to a range of 1% to 1.25% was unanimous. The Fed also said in the statement that the “fundamentals of the U.S. economy remain strong.”

The Fed acted hours after Powell and finance chiefs from the Group of Seven nations said they would “use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.” That echoed a statement Powell made on Friday.

© 2020 Bloomberg L.P.

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The age of madness! The US has had an 11y bull market. Now politicians and central bankers and bankers want to put the bull on life support by way of more stimuli to “defend” the fat lazy bull against naked capitalism. So much for the laws of supply and demand. What next : negative US treasury rates?

Its crazy that we have researched the point where a justified market reaction has to be stemmed with monetary stimulus.

The thing these central banks however don’t seem to understand is that you can’t stimulate your way out of a global pandemic.
Consumer spending is bound to be lower by virtue of people quarantining themselves.

This latest round of stimulus will simply end up as inflation, its not going to find a home in financial markets, that’s for sure.

Most probably. Same problem with Australia!

That’s how progressive governments revive economic cycles… Anything above 4,5% anywhere in the world kills economic momentum.

SA needs to have balls and drop the rate dramatically!

Dadape:

I would be with you if these stimulii trickled down. Thing is, they don’t. Mom & Pop business in the US still face 8% overdraft rates despite the taxpayers pumping trillions into QE so that the bankers can maintain a 5% margin. Never mind here in SA business or productive asset finance appears to run at 16% in the formal sector (calculate the IRR on a lease of IT equipment if you want to throw up). Informal sector more like 30% or more

Shakespeare was wrong : first, we shoot the bankers

No. The opposite. What we need to do is attract FDI.

@DadApe. The only rate that needs to drop is SA’s CRIME rate!!

….the elephant in the developed economies and to a extent even in emerging is the “boomer effect”. Aged or retirees who do not want to spend savings or cashin investments OR cashin in investments for “living expenses only”

…this demographic is the cliff manufacturers fear …and 50% millennial’s are saving by way of stock markets like no other generation whilst the other 50% are living with parents

…open for correction but its the way I see it..

Woohoo, free money Yes Please.

Buy more booze for the alcoholic, he will sober up one day and realise that the Party is over and it’s time to pay back the debt.

Instead of bailing our the Too Big to fail businesses, bailout the Citizens and make new debt expensive. That is the reform we need, to put an end to credit card life styles and poor financial education.

The market repaid the Fed’s kindness of a 0.5% rate drop by actually ending down close to 3% – S&P and DOW. This should terrify investors, as even with the hope of cheap money, and the talking stating how this will increased demand (although the current issue is a supply chain and cashflow issue), there is still a sell-off.

It is going to be an interesting month.

MADNESS – we have an 11 year bull market, who on earth would have thought that in the depths of despair in 2009 that 10 years on the DOW had nearly tripled to 30,000 – we have the wonderful media and their click bait, driving the globe into a frenzy on the corona virus. 1 weeks and a 12% drop in the DOW, i think only no.7 or 8 in the biggest weekly drops in history and the FED panics, maybe politics and slashes 0.5%. They should have put it up 1%.

The pension crisis that is already here globally needs much higher rates, hell in Europe they are negative. Most people are not even aware of the repo rate crisis that is brewing in the USA, caused by the EU meltdown. Anyone that watches may have noticed the over night rate ticking along at around 0.25 – 0.50% then suddenly in a day or 3 in September a financial crisis somewhere, caused it to spike to over 10% a 40 fold increase in a country the size of the US!!! and required massive intervention, this is not covered anywhere. Some say it was part of the Deutsche Bank derivatives book blowing up, or something linked to it and the forced merger with Commerzbank – the FED must be soiling themselves cutting 0.5% seeing a surge and now the market is off nearly 600 points – confidence is everything, the public do not like to see their governments panicking.

Corona virus really – the hype and panic is worst than the disease. I know 3 people that had it and recovered in early January … one a close friend. His comment was if he was not forced into quarantine after testing positive, he would have carried on going to work and probably only have missed 3 days off gym. He said he has had far worst colds and flu in his life, his 2 colleagues said the same – yes they fit and in their 40s. we are all gasping at the headlines – death toll after 4 months of the outbreak surpasses 3000! … wow, does anyone realise that 1800 people a day, yes a day die from the common cold and influenza flu but you see nothing in the papers about that. Just talk of closing off cities panic buying idiots in London walking around with gas masks on, people on buses and train with the useless paper mouth and nose masks. Why not just let it burn itself out – by all means take some steps but do not destroy our way of life, i suppose panic allows control and more draconian measures to be introduced and never removed. Morality rate is around 2% same as colds and flu. 85000 people have allegedly contracted it in 4 months, in the same period 6 million have caught the normal cold.

They say it is not in Africa nonsense – it is well and truly here. But it is just being treated like colds, secondary bacterial infections as usual are being treated by Augmentin and Zithromax.

Corona is a good cover in the face of a USD that is getting way too strong, anyone read up on the WHO pandemic bonds expiring in June this year, if they declare a true pandemic they are off the hook $500m if not they have to repay having paid between 9-11% on them for the last 3 years – some incentive to create a panic and stave off a EURO collapse a little longer in the process 2 birds with one stone. Hmmm interesting times indeed.

@Remus’s twin brother! 😉

Sensible & brilliant comment. You need to copy this comment to another thread on MW today “Global fatality rate 3.4%…”

As with most global events on the planet….just follow the money trail (who and which empires benefits through what). It replaces the old physical empire conquering of a past era. Empire building of the past was about acquiring wealth from other regions/countries….now easier done on global indexes.

Centralised(?) global economic power must not be underestimated…it sits behind most world events (or over-hyping natural events for certain economic advantage). No need to physically conquer…just manipulate global money flow caused by events.

Example copied from http://www.cdc.gov website: “About 647,000 Americans die from heart disease each year”. We’re talking actual deaths….not mere infections.
The media does hype events (all about advertising revenue), so the reader public lose comparative perspective.

Create fear & you move markets!
(on a smaller scale, just damage a company’s reputation by creating doubt…e.g. the US versus Huawei 5G (2019) or NAA, Kaspersky Lab (2015) and you hurt your competition.)

There was such robust and value added comments on this article. Thanks so much everyone. It makes me really happy when everybody is not hating on SA and speaks factually and constructively! Really appreciate it and thank you. I know everybody on this platform is very intelligent and we need to work together to make SA dynamic and prosperous.

End of comments.

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