March 30, 2020

Fed Official Says Coronavirus Economic Fallout ‘Could Spill Over’

He suggested that it was a good time for long-term investors to buy equities and said he did not expect the Fed to “make any panic move.”

“The markets are obviously reflecting a lot of new fears,” Mr. Kudlow said. “I do not think these are fundamental factors.”

Robert S. Kaplan, the president of the Federal Reserve Bank of Dallas, signaled in an interview that he was not particularly concerned with the stock market swoon.

“It broke to the high side,” Mr. Kaplan said of stock market valuations before the recent decline. “I watch this market correction in the context of where we started.”

But he and his colleagues are watching the virus itself carefully, he said, and Mr. Kaplan is especially attuned to what it means for supply chains and logistics.

“We’re just going to have to monitor this very carefully over the next X number of weeks,” he said.

Fed officials entered 2020 planning to leave interest rates unchanged for a time, and they are waiting for something to significantly change their economic outlook before they alter that course. The Fed slashed its policy rate three times last year to blunt the effects of a global growth slowdown and to cushion against uncertainty stemming from President Trump’s trade war.

The economy is now growing steadily, with a jobless rate that has hovered near a half-century low for more than a year and inflation that has remained persistently below the Fed’s 2 percent target. That gives the Fed room for patience before it moves again, officials have said.

Investors, for their part, increasingly expect the Fed to act. Markets have nearly fully priced in a rate cut by year end, and see high odds that the Fed could cut more than once. Fed officials next meet on March 17 and 18 in Washington, giving them time to watch incoming information before they make any decisions.

Article source: https://www.nytimes.com/2020/02/25/business/economy/fed-coronavirus-economy.html

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