Washington (AP) - The US Federal Reserve has surprisingly cut its key interest rate by half a percentage point due to the emerging economic effects of the new corona virus.
The key interest rate is now in the corridor of 1 to 1.25 percent, the Federal Reserve (Fed) said on Tuesday. The central bank will continue to monitor the situation and its economic consequences closely and "use its funds to react appropriately to support the economy". The next regular meeting of the central bank, at which the key interest rate should be decided, should actually only take place in two weeks.
The central bank had already announced at the end of last week that it was closely monitoring the effects of the epidemic of the new corona virus and was ready to act if necessary. US President Donald Trump has repeatedly called on the government-independent central bank to cut interest rates because of the effects of the corona virus. He fears a dip in growth as a result of the epidemic - probably also in view of the November presidential election.
The effects of the coronavirus epidemic are already weighing on global economic development. To date, however, only around 100 infections and six deaths have been reported in the United States.
The Fed cut its key rate three times last year by 0.25 percentage points each, but left it unchanged at the last two meetings given the solid economic development and low unemployment in the United States.
Just a few hours before the Fed's declaration, the leading Western industrialized countries (G7) had expressed their willingness to deal with the economic consequences of the crisis. The spread of the novel corona virus and the effects on financial markets and the economy would be closely monitored, said a statement by the finance ministers and central bank heads of the G7.
"Given the potential impact of Covid-19 on global growth, we reaffirm our commitment to use all appropriate policy instruments to achieve strong and sustainable growth and to protect against downside risks," said Finance Ministers are ready to take fiscal measures too - for example, higher government spending - to the extent necessary. The G7 group includes the United States, Japan, Germany, France, the United Kingdom, Canada and Italy.