Fed Official Says Central Bankers Are Aligned in Coronavirus Response – The New York Times

The Federal Reserve Bank of New York president, John C. Williams, made clear on Thursday evening that officials viewed the emergency rate cut they approved earlier this week as part of an international push to cushion the economy as the coronavirus threatens global growth.

Mr. Williams, one of the Fed’s three key leaders, spoke in New York two days after the Fed slashed borrowing costs by half a point in its first emergency move since the depths of the 2008 financial crisis. The move came shortly after a call between finance ministers and central bankers from the Group of 7, which also includes Britain, Canada, France, Germany, Italy and Japan.

“Tuesday’s phone call between G7 finance ministers and central bank governors, the subsequent statement, and policy actions by central banks are clear indications of the close alignment at the international level,” Mr. Williams said in a speech to the Foreign Policy Association.

Rate cuts followed in Canada, Asia and the Middle East on Wednesday. The Bank of Japan and European Central Bank — which already have interest rates set below zero — have yet to further cut borrowing costs, but they have pledged to support their economies.

Mr. Williams’s statement is significant, in part because global policymakers were criticized for failing to satisfy market expectations for a coordinated rate cut among major economies. Stock prices temporarily rallied after the Fed’s announcement, but quickly sank again.

Central banks face challenges in offsetting the economic shock of the coronavirus.

Many were already working hard to stoke stronger economic growth, so they have limited room for further action. That makes the kind of carefully orchestrated, lock step rate cut central banks undertook in October 2008 all but impossible.

Interest rate cuts can also do little to soften the near-term hit from the virus, which is forcing the closure of offices and worker quarantines and delaying shipments of goods as infections spread across the globe.

“It’s up to individual countries, individual fiscal policies and individual central banks to do what they were going to do,” Fed Chair Jerome H. Powell said after the cut, noting that different nations had “different situations.”

Mr. Williams reiterated Mr. Powell’s pledge that the Fed would continue monitoring risks in the “weeks and months” ahead. Economists widely expect another quarter-point rate cut at the Fed’s March 18 meeting.

The New York Fed president, whose reserve bank is partly responsible for ensuring financial markets are functioning properly, also promised that the Fed stood ready to act as needed to make sure that everything is working smoothly.

Since September, when an obscure but crucial corner of money markets experienced unusual volatility, the Fed has been temporarily intervening in the market to keep it calm. The goal is to keep cash flowing in the market for overnight and short-term loans between banks and other financial institutions. The central bank has also been buying short-term government debt.

“We remain flexible and ready to make adjustments to our operations as needed to ensure that monetary policy is effectively implemented and transmitted to financial markets and the broader economy,” Mr. Williams said Thursday.

  • Updated March 2, 2020

    • What is a coronavirus?

      It is a novel virus named for the crownlike spikes that protrude from its surface. The coronavirus can infect both animals and people and can cause a range of respiratory illnesses from the common cold to lung lesions and pneumonia.
    • How contagious is the virus?

      It seems to spread very easily from person to person, especially in homes, hospitals and other confined spaces. The pathogen can travel through the air, enveloped in tiny respiratory droplets that are produced when a sick person breathes, talks, coughs or sneezes.
    • Where has the virus spread?

      The virus, which originated in Wuhan, China, has sickened more than 89,700 in at least 67 countries and more than 3,000 have died. The spread has slowed in China, but is picking up speed in Europe and the United States.
    • What symptoms should I look out for?

      Symptoms, which can take between two to 14 days to appear, include fever, cough and difficulty breathing or shortness of breath. Milder cases may resemble the flu or a bad cold, but people may be able to pass on the virus even before they develop symptoms.
    • What if I’m traveling?

      The C.D.C. has advised against all non-essential travel to South Korea, China, Italy and Iran. And the agency has warned older and at-risk travelers to avoid Japan.
    • How long will it take to develop a treatment or vaccine?

      Several drugs are being tested, and some initial findings are expected soon. A vaccine to stop the spread is still at least a year away.

Read More

Add Comment