Federal Reserve Chairman Jerome Powell made a well-directed and much-needed statement on Friday, maintaining the possibility of a cut by the central bank in interest rates, in an attempt to take back control of the narrative on the Fed’s response to the coronavirus outbreak.
Powell’s remarks, offered in a prepared statement, represent a good first step. We also believe there needs to be coordinated action by central banks globally next week and a healthy push from Powell on United States fiscal action.
The question remains whether the Fed’s cut will be 25 or 50 basis points. The fiscal authority will need to act robustly to address the needs of the real economy sooner rather than later.
In addition, the Democrats’ proposed $8.5 billion special supplemental funding to combat the coronavirus is just a down payment on what will most likely be needed to address the rapidly growing public health crisis. Fed action is warranted and will bolster financial conditions. It’s a necessary– though not sufficient — move to address the crisis.
