InvestorQ : Why did the US Federal Reserve cut rates by 0.50% on March 03? Why did not wait for the Fed meeting later the month?
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Why did the US Federal Reserve cut rates by 0.50% on March 03? Why did not wait for the Fed meeting later the month?

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Rashi Mehra answered.
12 months ago
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As the Fed explained, it was an emergency move to give confidence to the markets in the midst of the virus scare. It was surely a move that took global markets by surprise. The US Federal Reserve cut the Fed rates by 50 basis points in one stroke. This reduced the effective Fed Funds rate range from 1.50%-1.75% to 1.00%-1.25%. According to the Fed, this move was necessitated by the sudden fall in global growth due to the lag effect of the Chinese Coronavirus. The CME Fedwatch had hinted at a 100% probability of a 25 bps rate cut in March but the speed and suddenness took markets by surprise. Even in 2008, the US had acted pre-emptively to give confidence. The Fed meeting is to the end of March and that may have been too late.

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