Fed emergency rate cut a 'necessary move': Rosenberg
The U.S. Federal Reserve’s surprise move to cut interest rates by half of a percentage point Tuesday amid the rapid spread of COVID-19 was “the right thing to do,” according to David Rosenberg.
“In some sense, it’s a surprise in terms of the timing. I was thinking there might have been a coordinated action over the weekend since [Fed Chair Jerome] Powell had hinted at that on Friday afternoon,” the chief economist and strategist at Rosenberg Research and Associates told BNN Bloomberg shortly after the decision.
“I think it’s a necessary move. I know people will be thinking, ‘What does the Fed know that we don’t know?’ … all the risk to the economic outlook are to the downside. So that’s why they moved today.”
Just last week, Rosenberg warned the spread of the coronavirus would likely tip the global economy into a recession.
“There’s going to be, I think, quite long-lasting economic impacts that are just starting right now. And the run rate on global growth was already anemic,” he said Thursday.
The Fed’s Tuesday announcement came a couple hours after G7 finance ministers and central bankers vowed to use all “appropriate policy tools” to safeguard the economy from risks tied to the impact of the virus’s spread – but stopped short of offering any immediate coordinated stimulus.
“When you’re the Federal Reserve, you have interest rates as your policy tool, and you’ve had a downside shift in your growth trajectory in your outlook. You have absolutely no choice but to move,” Rosenberg said.
“And I think the fact that they moved early was the right thing to do.”
Rosenberg said he expects the Fed will cut rates again at its March 18 meeting.