Will central banks follow the Feds lead and cut rates?

The US regulator took action last week as the effects of the coronavirus on the economy became clearer.

By Emirates NBD Research

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The last two weeks has seen markets abruptly catch up with the reality of the coronavirus crisis, with bond and equity markets forcing the US Federal Reserve's hand to cut interest rates suddenly. This was the first inter-meeting change in rates since the 2008 financial crisis.

The Fed cut interest rates by 50 basis points in an emergency move bringing the lower bound of the rate to 1.0 per cent. This was very much a pre-emptive step to guard against an economic slowdown, with demand now becoming just as negatively affected by the global impact of the virus as supply.

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