Federal Reserve Chairman Jerome Powell said the coronavirus outbreak had increased risks to the U.S. economic outlook, prompting the central bank to deliver an emergency half-percentage point interest rate cut.

”My colleagues and I took this action to help the U.S. economy keep strong in the face of new risks to the economic outlook,” he told a hastily convened press conference in Washington on Tuesday. “The spread of the coronavirus has brought new challenges and risks.”

U.S. stocks initially advanced after the announcement before sliding into losses, while the 10-year Treasury yield neared 1%. Fed funds futures are pricing more than a percentage point of central bank rate reductions for 2020, including another quarter-point cut in the first half of the year.

The central bank said in its statement that it was “closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”

Powell, in response to a reporter question about the scope for further moves, said “we do like our current policy stance,” before repeating the Fed’s reference to taking action if needed.

G-7 Coordination

The Fed’s decision could presage a wave of easing from other central banks around the world although those in the euro-area and Japan have less scope to follow with rates already in negative territory.

It came hours after Powell and finance chiefs from the Group of Seven nations said they would “use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.”

The vote for the rate cut to a range of 1% to 1.25% was unanimous. The Fed also said in the statement that the “fundamentals of the U.S. economy remain strong.”

The Fed move followed public pressure for a cut by President Donald Trump, whose stewardship of the economy is central to his reelection campaign this year. After today’s shift he called for more, demanding in a tweet that the Fed “must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA.”

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