The emergence of the coronavirus has had a severe detrimental effect on the global and the American economy, and this has correspondingly led to a drop in global interest rates. The drop in global interest rates specifically “reflects expectations that the Federal Reserve and other central banks will cut interest rates or take other actions to try to contain the economic damage” of the coronavirus. As the article notes, continually decreasing the rate of interest also leaves the global and the American economy “vulnerable if things were to really take a turn for the worse,” and it will also limit the ability of the Federal Reserve to pursue effective monetary policy. Overall, economists and investors are expecting two to three more interest rates cuts, and this leaves little room for further economic stimulus.
https://www.nytimes.com/2020/02/28/upshot/coronavirus-interest-rates-economy.html
3 comments:
This is incredibly important to pay attention to as we watch the global economy slow down as a whole as well. For the US, now with reported cases of the coronavirus showing up, it will be key to see how the Fed and the government both respond in order to keep the economy consistent. And as you noted, there is not much room for them to do much.
Again, the virus gonna keep hurting the economy, but I think the world's economy's going to pick up quick again once the virus is gone. But, I think if the Fed is going to cut more interest rates, it will be interesting to see how the economy is going to cope in the current situation.
As we gain more knowledge on the coronavirus, the fears will begin to die down. Since it is fairly new to have cases in the US, I believe we will see more damage to our economy in the coming months. I think it is great to note that the FED has to be careful about lowering interest rates if they want to use monetary policy in the near future if things get worse. I think they will heavily consider that, and that will make them hold back on how low they drop interest rates.
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