Coronavirus, the Fed, and the steady 2020 that wasn't

Regardless of the ultimate effect of the coronavirus on the economy, lower rates today will be a negative for bank profits

Eric Compton 5 March, 2020 | 1:04AM

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2020 started off as another seemingly normal year for the economy. There were, of course, the quotidian worries about slowing manufacturing output in certain parts of the world, a generalized but moderate slowdown in global GDP, and if we could ever get inflation trending higher again. These really weren’t new concerns; these were the normal, daily economic apprehensions of a formerly placid 2020. This has all changed quite dramatically due to the global outbreak of the coronavirus.

Officially recognizing these evolving risks, the Federal Reserve has cut its target rate by 50 basis points, to the 1-1.25 percent range. The Fed released a statement on Feb. 28, stating that it was closely monitoring the situation and that it would “act as appropriate to support the economy.” The markets interpreted this statement as a direct signal that the Fed would imminently cut rates, and the markets have been proved right, as the Fed released another brief statement the morning of March 3 stating that the Fed was lowering its target rate by 50 basis points. The vote was unanimous.

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Eric Compton

Eric Compton  Eric Compton is an equity analyst for Morningstar,