Due to the recent increase in cases of COVID-19 and global widespread, the U.S Federal Reserve has announced that they will be employing interest rate cuts down to zero, and the Trump administration is working on unveiling a stimulus plan. The virus has resulted in a global economic shock, and financial markets have taken a deep plunge. All three U.S indexes were nearly 20% below their average highs, and Italian stocks fell over 30%. Oil prices suffered their worst day since 1991 on Monday, concluding a price war between Saudi Arabia and Russia. U.S oil prices dropped over 34%, the greatest in a four year low, and all of this has happened in a matter of days. Most economists are predicted that even thought the threat of a recession is something that can be controlled, stagflation (slow growth coupled with high prices) is a real threat. Global supply shocks, labor shortages due to the fear of the virus, coupled with slashed interest rates could be a strong cause of possible stagflation. With China slowly recovering from the virus and somewhat stabilizing, the economic disaster is slowly creeping into the United States.
https://www.cnn.com/2020/03/10/investing/stagflation-economy-coronavirus/index.html
2 comments:
Under Trump administration, some costly errors have been made. For instance, there has been a delay in providing test facilities in the hospitals and testing only few people. This led a countrywide panic among investors and how to deal with it. Despite this, we see a some confidence leaping in among investors. henceforth let us not draw conclusion right now.
This is a real fear as the virus progresses and gets more widespread. Because growth is going to be hard to come by because there are so many places shutting down and people are being told to stay inside. As this progresses many things like stagflation will become more and more likely to happen
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