The US Federal Reserve is at it again. For the second time this month, the Fed has done an emergency rate cut. On March 3, a 50 basis point cut was implemented and that was followed with a 100 bps cut on March 15. If that was not enough, the Fed also announced a $700 billion quantitative easing program. Surprisingly, in response to this, equities markets reacted by dropping over 11%.
This shows that the markets are signaling to the Fed that rate cuts are not the solution for every problem at hand. After a few months when the coronavirus pandemic is brought under control, all this excess liquidity being pumped into the system will become a huge headache.