'Interest rate cut mostly helps to reduce volatility'
The Fed’s rate cut was not the most clear-cut answer to the corona crisis, says Hendrik Tuch, head of fixed income at Aegon Asset Management.
But he understands the decision.
Fed rate cut fails to convince investors
Investors did not respond to the Fed’s surprise 50 basis points rate cut with a relief rally. To the contrary, markets closed almost 3% lower as investors interpreted the rate cut as a warning the macroeconomic situation is likely to worsen.
Fed president Jerome Powell stated shortly after Wall Street opened that the negative effects of the coronavirus are slowly becoming visible.