The US Federal Reserve took everyone by surprise by announcing the cut in interest rates by half a point on Tuesday in the face of the Coronavirus epidemic. This announcement had the effect of worrying even more investors who said that the authorities fear the worst. The signal sent on Tuesday was reassuring, it produced the opposite effect.
The battle against the Coronavirus is also the business of financiers, the American Central Bank released heavy artillery on Tuesday.
By lowering interest rates by half a point. Alas, it is a little panic. It reminds us of the subprime crisis in 2008. The US Federal Reserve caught everyone off guard. No one expected such a drop in interest rates. The chairman of the Federal Reserve justified it on the grounds of "providing significant support to the economy". Bad luck, this had the effect of worrying even more investors who said that the authorities fear the worst. The aim was to prevent the health crisis from turning into a major financial crisis. The signal sent on Tuesday was reassuring, it produced the opposite effect.
This decision to lower the cost of credit, however, is what Donald Trump was asking for.
The pressure on the American central bank was maximum. Besides, right after this decision, Trump added more in a tweet calling for a further reduction in interest rates. We know that we are in the middle of an election campaign. The fall of Wall Street in recent days hits tens of millions of Americans in the portfolio. Hence the nervousness of the White House. What is also worrying is that faced with a global health threat with major economic consequences, the major countries do not really agree among themselves on the responses to be given, neither at the G7 nor within the euro zone. . Some want fiscal stimulus, others don't. The division virus is perennial.