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Can Fed save economy, 401(k)s from outbreak?


Can the Fed really rescue the economy – and your 401(k) — from the coronavirus?

The Federal Reserve lowered its key interest rate Tuesday by a half a percentage point to a range of 1% to 1.25% in an emergency move, responding to the impact of the outbreak on the economy and financial markets.

But some economists have questioned whether rate cuts can be effective in fighting the coronavirus’s distinctive economic impact, which largely centers on fears that limit people’s mobility and disrupts global supply chains.

Lower borrowing costs typically spur more consumers to buy houses, cars and other products, and encourage businesses to purchase more equipment such as factory machines, computers.

But historically low rates can’t address delayed deliveries from China that leave store shelves half-filled and auto manufacturers short of imported parts. They can’t prod shoppers fearful of contracting the virus to visit malls and restaurants. And they can’t bring back throngs of foreign tourists to U.S. hotels and shopping centers, including many from China and other countries now subject to travel bans.



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