The US Federal Reserve cut the prime interest rate this morning by 0.5% in an attempt to ward off a recession and market crash due to coronavirus disruptions of the world economy.
The Fed lowered its key federal fund rates by half a percentage point to a range of 1% to 1.25%, the central bank said in a statement. It marked the Fed's first rate cut between scheduled meetings since the depths of the financial crisis in 2008.
The emergency cut came after conference call between the G-7 economic powers last week in which coordinated action to boost the world economy was discussed.
There is speculation that the Federal Reserve will further reduce rates at its regular meeting on March 17-18.
The Dow Jones industrial stock average had a terrible time last week, regained ground Monday and was down about 800 points at the close despite the rate cut.
Donald Trump’s main claim to reelection was a good economy, but now that trillions of dollars in the value of 401Ks has been wiped from the books, that claim is starting to look thin.
Even before the virus, parts of the US economy was suffering due to Trump’s trade wars. With China, South Korea, and possibly other areas of the world reducing production of manufactured items, US manufacturing plants may start running out of parts in a few weeks forcing them to close.
Areas of the economy that involve vacation, and travel will be hit the worse. Florida, Nevada, Hawaii, and cities with major airline hubs will be hit badly.
If, or rather, when the virus fully enters into the US population mainstream, the effects could be almost beyond imagining. It is likely to be worse in the US than the rest of the Western world because many people can not afford to take off work when sick and have no health insurance so avoid doctor visits. People who receive no care because they have no insurance will help spread it to those who do have insurance.