Coronavirus Threat May Trigger Rate Cut: Banks In Trouble?
Zacks Investment Research | Mar 01, 2020 08:35PM ET
The Coronavirus, also known as COVID-19, which originated in China, has sent jitters across global markets, including the United States. Concerns over the crippling COVID-19 impact on the U.S. economy are keeping investors on their toes. Consequently, the yield on benchmark 10-year Treasury note plummeting sharply as investors is moving toward safe-haven assets.
A major sell-off was recorded following the drastic spreading of the virus globally. In fact, the U.S. equity markets continued to tumble last week. Since Feb 19, the S&P 500, Dow Jones and Nasdaq have tanked more than 12%. Also, yield on the 10-year U.S. Treasury note declined to an all-time low. Consequently, anticipations of another Fed rate cut this year, in a bid to help the economy, have been making rounds in the market which will further erode banks’ margin.
Therefore, amid all the jitters in the market, Fed chairman Jerome Powell issued a statement on Friday related to boosting of the U.S. economy.
“The fundamentals of the U.S. economy remain strong,” said Powell said in a statement released Friday afternoon. “However, the Coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy,” he further noted
During the FOMC meeting last December, the central bank had indicated that it will keep interest rates unchanged this year. However, within three months, the stance is likely to change.
Per the CME FedWatch Zacks Investment Research
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