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Investors are practically begging the Fed to cut rates again as coronavirus threatens the economy — even though the central bank just did


  • Markets are calling for lower interest rates even after the Fed handed down an emergency half-point cut on Tuesday to combat coronavirus' potential impact on the US economy. 
  • Seventy-eight percent of traders think the Fed will cut another 50 basis points, while nearly 22% think there will be a 25-basis-point cut at the next meeting March 17-18, according to CME's FedWatch tool. 
  • "Everything is on the table," James Bullard, president of the Federal Reserve Bank of St. Louis, told Bloomberg TV in a Friday interview.
  • Read more on Business Insider.

The market is screaming for interest rates to fall even further just days after the Federal Reserve issued its first emergency cut since the financial crisis. 

The central bank slashed interest rates by a half percentage point on Tuesday to combat the potential impact of a coronavirus outbreak on the US economy. But markets didn't react positively to the move — stocks continued to fall, and investors rushed into safe-haven assets sending yields on long-term US Treasury bonds down. 

On Friday, yields on both the 10- and 30-year US Treasury bonds fell to record lows, a sign that the market still thinks fiscal policy is too tight. Traders are betting that the Fed lowers rates even further at its next meeting March 17-18. As many as 78% of traders think the Fed will cut another 50 basis points, while nearly 22% think there will be a 25-basis-point cut in March, according to CME's FedWatch tool. 

That could bring the federal funds rate to between 0.50% and 0.75%, down from where it currently stands between 1.0% and 1.25%. 

The central bank appears to be listening to investor concerns. "Everything is on the table," James Bullard, president of the Federal Reserve Bank of St. Louis, told Bloomberg TV in a Friday interview.

"We are willing to do more. But we are monitoring the situation. We can meet at any time," he said. 

While there are "downside risks to growth" associated with the potential for a coronavirus pandemic, markets seem to be pricing in the worst-case scenario, Bullard said. There are positive signs that the situation in China is stabilizing, meaning that its economy could return to normal in the second quarter of the year, he said.


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