US Federal Reserve’s interest rate cut leaves markets in a dither | Nils Pratley

The coronavirus seems to have spooked the US central bank and Wall Street doesn't know which way to turn

Financial markets, having demanded a rate cut to fight a coronavirus-provoked economic downturn, didn't know which way to turn when the US Federal Reserve obliged with a half-point reduction. Wall Street's whoosh lasted an hour, and the next direction for stock markets is anybody's guess.

Confusion is understandable at two levels. First, one could say it's legitimate for the Fed to jump into emergency mode if it perceives "evolving risks to economic activity". Cutting borrowing costs, even by small amounts, allows businesses and consumers to save a few dollars that can be used to weather disruption. If that's the tactic, you might as well move early.

Related: US Federal Reserve's interest rate cut leaves markets in a dither | Nils Pratley

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