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Discuss the impact of Federal Reserve Bank (Fed)’s the interest rate cut policy on the stock...

Discuss the impact of Federal Reserve Bank (Fed)’s the interest rate cut policy on the stock market recently

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In the last few weeks markets have been in turmoil because of the spread of the disease and the fear that it will spread further and hamper the economic activity of the world. Many people have been saying that the spread of disease will cause the economy to go into recession and if not recession then it will take at least couple of quarters to recover from it. In order to make sure that the economic activity does not fall further fed reserve slashed the federal funds rate by 100 basis points so that the consumer sentiments does not fall. When the rate cut happened the DJIA surged couple of hundred points but the rate cut has not been that much effective in lifting the mood of the market. Interest rate cut happens because fed wants to increase consumption, people will borrow more, invest more and the productivity will increase but because of the spread of virus interest cut did not do much for the market. S&P 500 has fallen significantly since its January and Dow Jones fell by more than 800 points in a day. The interest cut has so far not been able to revive the market much but it seems that, it has reached its bottom so may be in some time when the affect of virus infection is reduced and people go back to their normal life, market will be back on it track and businesses can take the benefit of low interest rate.

jeff jeffy answered 1 year ago
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