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...... Fiscal policy will react very slowly, or not at all, given political and other constraints. Central banks are running out of bullets. How much more negative can the ECB, Bank of Japan and others go on rates? // Only a little lower. The Fed has only 1.5 percentage points of headroom left. It will probably react in the second quarter by cutting rates, leading to short-term market relief. But this coronavirus outbreak is mostly a negative supply shock--that reduces growth and increases costs and inflation -- with some side-effects for aggregate demand. Monetary policy cannot resolve negative supply shocks. // So expect a temporary positive market reaction when central banks signal an accommodative response to the global pandemic. But this reaction will fizzle out when the virus becomes more severe and the economic impact spreads globally. Nouriel Roubini, Wednesday, 26 February, 2020 "Investors remain complacent about virus despite sell-off" FT, Market Insight ...... all kinds of things were going on today. ...... Fed Chair Jerome Powell released a one-paragraph Fed-speak statement Friday afternoon...... The thing is, interest rate cuts and QE or whatever other shenanigans the Fed concocts aren’t going to solve the problem posed by the appearance of the coronavirus. If you don’t want to get on a plane in order to avoid catching the virus, you’re not going to change your mind because T-bill yields dropped 50 basis points. Wolf Richter, 28 February, 2020 "Nothing Goes to Heck in a Straight Line," Not Even Stocks Today, Wolfstreet https:///2020/02/28/nothing-goes-to-heck-in-a-straight-line-not-even-stocks-today/ |
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