The US Federal Reserve (FED) has announced a surprise interest rate cut even though it has not been to the meeting, which has never happened since the 2008 financial crisis. The decision was made after Wall Street had the worst week since since 2008.
Fed Chairman Jerome Powell
Accordingly, the Fed's benchmark interest rate will range from 1% – 1.25%. In 2019, the Fed lowered interest rates 3 times, with 75 basis points.
This is a move that has long been predicted by the market. Observers expect the Fed to lower 0.5% interest rates at this month's policy meeting. However, the decision was even made before this session, expected to take place on March 17-18. This shows that the Fed feels urgently to act to prevent the global economic ability from falling into recession.
"Fundamentals of the US economy remain strong. However, the epidemic is increasingly threatening economic activities. In the context that these risks exist, in order to maintain price stability and maximize employment for the people, the Federal Open Market Committee (FOMC) today decided to lower reference rates, "the Fed said. in the notice.
This is the sharpest cut since the 2008 financial crisis. The latest interest rate lowering was launched in the context of the stock market witnessed strong fluctuations, along with the “incessant criticism”. “From President Donald Trump on calling on the Fed to lower interest rates to maintain the policy's competitiveness with other Central Banks globally.
The Fed said in a statement: "The spread of the corona virus has brought an ever-increasing risk to economic activity. Faced with these risks and to assist the economy in achieving its goals of increasing employment and stabilizing prices, the Federal Open Market Committee (FOMC) has decided to lower its interest rate margin. federal reserve. "
Accordingly, the Fed's standard interest rate will range from 1% – 1.25%. In 2019, the central bank lowered interest rates 3 times, with 75 basis points.
The Fed's new move comes at the same time that the G-7 said it had no concrete measures to support the global economy, facing the threat of corona virus and Wall Street. strong sell-off situation. In addition, the Fed reduced the excess reserve interest rate (IOER) by 0.5 percent for banks.
Gold soared 50USD / ounce
Immediately after the Fed's move, the financial markets had a positive response, in which stocks simultaneously gained and gold soared from around $ 1,600 / ounce to over $ 1,644 / ounce.
At the time of writing, spot gold price was around 1,646 USD / ounce, an increase of more than 50 USD, equivalent to 3% compared to the closing session of 2/3. April gold futures price on Comex increased by 48.8 USD to 1,643.6 USD / ounce.
10-year Treasury yield fell below 1% for the first time
10-year Treasury yield fell below 1% for the first time after the Federal Reserve cut interest rates to combat the spreading economic effects of coronavirus.
Benchmark 10-year Treasury yield fell more than 11 basis points to an all-time low of 0.906%. The yield of 30-year treasury bonds was also at a record low of 1,601%.
The Dow Jones Industrial Average fell nearly 800 points or 3% and traded within more than 700 points. S&P500 and Nasdaq also lost nearly 3%.
The Asian market ended opposite when China's Shanghai Composite index increased by 0.7% and Japan Nikkei of Japan decreased by 1.2%. South Korea fell more than 1%.
Bitcoin trades around $ 8,700
As soon as the Fed announced their statement, Bitcoin rose in price by nearly $ 200 and topped it at $ 8910 before retreating.
Bitcoin price chart of the last 1 month | Source: Coinmarketcap
The Fed Fed announcement may have inspired the spike in Bitcoin prices as investors reacted with positive sentiment. After the Federal Reserve announced the news, Bitcoin corrected and is currently at $ 8700.
See the bitcoin price chart here.
According to AZCoin News
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