Coronavirus Makes it Harder for the Fed to Keep Their Course

February 27, 2020

After implementing a series of insurance cuts to combat a global slowdown last year, the Federal Reserve announced that they were adopting a “wait and see” approach to future cuts. Now, the outbreak of the coronavirus may force their hand and spur them to act sooner than intended.

The Wall Street Journal reported today that a top Fed official said it was still too soon to determine in the Fed would cut rates to settle the markets, which have been in freefall this week over concern that the virus may become an epidemic.

The CME Group reports that investors are increasingly expecting at least one cut by June, and another by the end of the year. One problem facing the Fed is that rates are already historically low, meaning that they have little room to implement cuts should the disruption of the outbreak prove to be more prolonged or severe than currently expected.

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