Research Reports

U.S. Fed rate cut by 50 bps due to Coronavirus threat

March 04 , 2020

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Executive Summary

  • The U.S. Federal Reserve announced an emergency rate cut of 50 bps on March 3, 2020 citing the threat of novel coronavirus affecting economic growth in the near term.
  • The unscheduled rate cut by the U.S. Fed was the first such instance since December 2008, where policy action has been initiated away from a scheduled meeting.
  • The Central Banks of UAE, Saudi Arabia, Qatar and Bahrain followed suit by effecting cuts of 50 bps in their respective policy rates. Central Bank of Kuwait reduced its discount rates by 25 bps from 2.75% to 2.50%.
  • Whilst the effectiveness of the move is debatable, it shows the U.S. Fed is very receptive to the financial markets and is focused on preventing a recession in the near term at all costs.

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