The coronavirus outbreak that began in Wuhan, China, in late 2019 has spread fast and caused global panic. Even the financial markets have suffered, causing the Federal Open Market Committee (FOMC) of the Federal Reserve to decrease its rate by half a percentage point in an emergency move. This sets the Fed’s target interest range for federal funds at 1-1.25 percent.
The unanimous decision to drop rates, announced Tuesday, was made during an urgent session less than two weeks before the FOMC’s next scheduled meeting. The last time the Fed made such an emergency change was more than a decade ago, during the 2008 housing crisis. Indeed, investors recently had their worst week on the market since the Great Recession. Fears of an imminent coronavirus pandemic caused major stock indices to tumble over ten percent.
According to a statement released by the FOMC, “The coronavirus poses evolving risks to economic activity.” Mortgage rates have already declined since the outbreak started and the federal rate cut makes it likely that home lending rates will fall again. MoneyTips is happy to help you get free mortgage and refinance quotes from top lenders.
“The outbreak has disrupted economic activity in many countries and prompted significant movements in financial markets,” said Federal Reserve Chairman Jerome Powell. Experts believe the Fed is likely to lower the rate again at its meeting ending on March 18th.
Although the rate reduction may pacify investors somewhat, it won’t prevent the virus from spreading further. Nor will it curb the economic impact of factories being shuttered if they don’t receive supplies from overseas.
Chairman Powell stated that it will take a combined effort from Congress, health care professionals, and other entities to address issues in the global supply chain. However, rate cuts may be able to lessen borrowing costs for U.S. companies struggling to find alternative supply sources.