This is the first time in over 11 years that the Fed has cut policy rates by 50 bps or more
In the wake of volatility in the financial markets due to COVID-19 (novel coronavirus), the Reserve Bank of India (RBI) on Tuesday said it was ready to ensure that the markets ran well and confidence was maintained. It is monitoring global and domestic developments. RBI Governor Shaktikanta Das, in an interview to Bloomberg on Tuesday, said there was a strong reason for coordinated policy action. And the option before the RBI includes a rate cut and supporting the market through liquidity measures, building confidence, and other instruments to deal with emerging challenges.
Also, in a major step to arrest the economic fallout of coronavirus, the Federal Reserve cut its benchmark policy rates by 50 basis points (bps). This is the first time in over 11 years that the Fed has cut policy rates by 50 bps or more. The last time was in December 2008, when the rates were lowered by 75 bps. In the past 12 instances when rates were either hiked or cut, the extent of change was 25 bps.
“In the 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 ½ percentage point,” the Fed said in a statement. The Dow Jones index of the US was, however, down 310.41, or 1.16 per cent, as of 11:20 pm. The Fed’s move came just after the G7 central bankers issued a statement that they would use all policy tools to achieve strong sustainable growth and safeguard against downside risks…
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