U.S. cuts rates as G7 pledges to fight coronavirus

WASHINGTON/TOKY0 (Reuters) – The U.S. Federal Reserve cut interest rates on Tuesday in an emergency move to shield the world’s largest economy from the impact of the coronavirus, as Group of Seven finance officials pledged unspecified “appropriate” policy moves.

The Fed said it was cutting rates by a half percentage point to a target range of 1.00% to 1.25%. The decision was unanimous.

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity,” it said in a statement.

President Donald Trump said a half point cut was not enough.

The coronavirus, which emerged in the central Chinese city of Wuhan late last year, has spread around the world, with more new cases now appearing outside China than inside. It has hit sports events, trade exhibitions, concerts, book fairs, prayer meetings and other large gatherings worldwide.

There are more than 90,000 cases globally of which more than 80,000 are in China. Infections have appeared in 77 other countries and territories, with Ukraine the latest to report its first case.

China’s death toll was 2,943, with more than 125 deaths elsewhere.

Finance ministers from the G7 group of rich countries were ready to take action, including fiscal measures where appropriate, Japanese Finance Minister Taro Aso said. Central banks would continue to support price stability and economic growth.

“We reaffirmed our commitment to adopt all appropriate policy steps to protect the economy from downside risks posed by the coronavirus, and that we stand ready to cooperate further on timely and effective measures,” Aso told reporters after a G7 call.

He offered no quick fix and said the desirable policy response would vary from country to country. Asked if all appropriate policy steps would include both monetary and fiscal measures, Aso said: “Yes, anything will be included.”

Trump said the Fed needed to ease rates further to “come into line with other countries/competitors,” Trump tweeted.

“We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!” he tweeted.

AGGRESSIVE CONTAINMENT

U.S. Treasury Secretary Steven Mnuchin applauded the “non-political” Fed move and told the U.S. House Ways and Means Committee that G7 finance ministers and central bank governors had agreed to “do everything possible” to limit economic harm.

He said the United States was not considering lowering tariffs on goods from China, after a bruising trade war with the world’s second-largest economy, but would look at all options.

Global stock markets seesawed in volatile trade and gold prices rose more than 2% after the Fed move. Shares in Europe rose to trade more than 2% higher on the day.

Global stocks suffered a rout last week on fears that the disruption to supply chains, factory output and global travel caused by the epidemic could deal a serious blow to a world economy trying to recover from the U.S.-China trade war.

In China, new coronavirus cases have been falling sharply, with 125 reported on Tuesday, thanks to aggressive containment measures.

World Health Organization chief Tedros Adhanom Ghebreyesus said in Geneva about 3.4% of reported coronavirus patients had died. As a percentage, seasonal flu, which infects hundreds of thousands each year worldwide, kills far fewer, he said.

After what critics said was an initially hesitant response, China imposed sweeping restrictions, including suspensions of transport, sealing off communities, and extending a Lunar New Year holiday across the country.

Now China is increasingly concerned about the virus being brought back into the country by citizens returning from new hotspots elsewhere.

Travelers entering Beijing from South Korea, Japan, Iran and Italy would have to be quarantined for 14 days, a city official said. Shanghai has introduced a similar order.

SIX DIE IN SEATTLE

The worst outbreak outside China is in South Korea, where President Moon Jae-in declared war on the virus, ordering additional hospital beds and more masks as cases rose by 600 to nearly 5,000, with 34 deaths.

In the United States, the virus is now believed to be present in at least four communities in the Pacific Northwest.

Six people have died in an outbreak in Seattle. The U.S. Centers for Disease Control and Prevention lists more than 90 cases nationwide, many of them patients repatriated from the Diamond Princess cruise liner that was quarantined in Japan.

Iran has had 77 deaths, the highest number outside China, and 2,336 confirmed infections, the health ministry said on Tuesday.

The death toll in Italy, Europe’s worst-affected country, jumped to 79 on Tuesday from 34 the day before and the number of confirmed cases passed 2,000. France reported its fourth coronavirus death.