ing that while the economy’s fundamentals remain strong, the “coronavirus-poses evolving risks to economic activity.”
*In a news conference, Fed Chairman Jerome Powell said “we saw a risk to the outlook for the economy and chose to act.”*
*“I don’t think anybody knows how long it will be. I do know that the U.S. economy is strong,” he said. Powell also hinted at the possibility of more formal global coordination in the future but markets have not taken the emergency action as an upbeat development.*
*Central bank easing can lubricate credit markets and boost demand by lowering the cost of borrowing. But, Powell noted, it cannot repair disrupted global supply chains or convince people to fly, attend meetings or even go to school, especially if local governments or companies bar such activities.*
“We do recognize that a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain; we get that, we don’t think we have all the answers,” Powell said. Still, he said, it will help support “overall economic activity.”
*Powell earlier on Tuesday participated in a conference call with the top finance authorities from the world’s seven largest advanced economies, which concluded with a statement that they would take all appropriate measures to support the global economy. At his news conference, he said the Fed was in active discussions with other central banks and said future coordinated action could yet occur.*
Earlier, Group of Seven finance ministers and central bank governors held a conference call Tuesday and issued a statement indicating their “commitment to use all appropriate policy tools to achieve strong, sustainable growth,” but signaled no concrete steps in the message.
Stocks initially popped sharply higher on the news of the monetary-policy moves but relinquished the gains before long.
Monetary policy is an unlikely cure for the coronavirus, Easing will have a positive impact on sentiment in the short term but until the contagion rates peak, expect uncertainty and volatility to continue.
In another indication that the Fed’s rate cuts failed to spark buying enthusiasm for risky assets, the safe-haven 10-year U.S. Treasury note yield carved out a historic low below 1%.
*The Fed’s actions come after worries about the economic harm from the epidemic resulted last week in the sharpest sell off in U.S. equities since the 2008 financial crisis. Hopes for responses from central banks and governments saw a significant partial recovery in global equities on Monday.*
*But many countries may be out of firepower, noted James McCormack, global head of sovereign ratings at Fitch Ratings. “The proper context for assessing any upcoming fiscal support pledges is the fact that G7 public finances are consistently among the weakest relative to their respective rated peers,” McCormack said in a statement.*
*In addition to the U.S., a number of countries have already acted independently, including the Reserve Bank of Australia and Malaysia’s central bank, which both reduced their benchmark interest rates Monday, citing coronavirus as the reason. The European Central Bank, meanwhile, is working on measures to provide liquidity to businesses harmed by the outbreak, according to Reuters.*
The OECD warned that growth will sink to levels not seen in more than a decade and ever more businesses are warning about the impact of the illness.
*U.S. Democratic presidential contender Joe Biden took his resurgent campaign to California on Tuesday in a last-minute push to blunt front-runner Bernie Sanders’ momentum as Americans voted in the largest round of state nominating contests. California, the most populous state, is a tantalizing prize in Super Tuesday elections in 14 states that are the first national test for candidates seeking the Democratic nomination to face Republican President Donald Trump in the Nov. 3 election.*
The governor of the Bank of England, Mark Carney, said it would take all necessary steps to help the economy. Australia lowered its benchmark by a quarter percentage point. Its currency rose, ho
By: via @AlliesFin Serve T.ME/ALLiESFiN
