The Federal Reserve delivered an emergency half-percentage point rate cut on Tuesday to protect U.S. economic growth from the impact of the coronavirus outbreak, but stocks slumped sharply and President Trump called on the central bank to do more.
“We saw a risk to the outlook of the economy and we chose to act,” said Fed Chairman Jerome Powell at a press conference after the move.
Stocks soared briefly after the announcement, but then fell into negative territory in volatile trading. By mid-afternoon, the Dow Jones Industrial Average had fallen more than 750 points, or nearly 3%.
Mr. Trump, who had urged the Fed to take action, said later that the rate cut wasn’t big enough.
“The rate is too high,” Mr. Trump told reporters. “It should be eased down so we’re competitive. We have the greatest country in the world, we have the strongest country in the world, it’s our dollar that the world relies on. We should have the low rate. But we have a Fed that doesn’t agree with that. I disagree with them.”
Mr. Powell said the central bank members “do recognize the rate cut will not reduce the rate of infection. It won’t fix the broken supply chain.”
“We get that…but we do believe our action will provide a meaningful boost to the economy,” he said.
The Fed said although the “fundamentals of the U.S. economy remain strong,” the coronavirus “poses evolving risks to economic activity.” The central bank acted two weeks before its regularly scheduled meeting.
“In light of these risks and in support of achieving its maximum employment and price stability goals,” the central bank said its Open Market Committee decided today to lower interest rates range by a half-percentage point, to 1 to 1.25%.
“The committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy,” the Fed said in its statement.
Voting for the monetary policy action were Mr. Powell; vice chair John Williams, and members Michelle Bowman; Lael Brainard; Richard Clarida; Patrick Harker; Robert Kaplan; Neel Kashkari; Loretta Mester; and Randal Quarles.
The action came hours after Mr. Trump urged the Fed again to cut interest rates in response to the coronavirus outbreak, saying the central bank should follow the example of Australia’s Central Bank.
“Australia’s Central Bank cut interest rates and stated it will most likely further ease in order to make up for China’s Coronavirus situation and slowdown,” Mr. Trump tweeted. “They reduced to 0.5%, a record low. Other countries are doing the same thing, if not more so.”
After the rate cut, Mr. Trump tweeted that the Fed should do “more easing and cutting.”
The Reserve Bank of Australia said Tuesday it was cutting its cash rate to 0.5% to ease the economic harm caused by the coronavirus.
After a meeting on Tuesday of Group of Seven finance ministers and central bank chiefs, Mr. Powell and Treasury Secretary Steven T. Mnuchin said the leaders “stand ready to cooperate further on timely and effective measures” to address the outbreak.
They said in a statement that the central banks and ministers are closely monitoring the coronavirus “and its impact on markets and economic conditions.”
“We reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks,” they said.
“Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase.”
Mr. Mnuchin told the House Ways and Means Committee on Tuesday, “I couldn’t be more pleased that we have at this point a very resilient U.S. economy as we go into the experience of the coronavirus.”
• Tom Howell Jr. contributed to this report.