Faced with an accelerating health crisis centered around the coronavirus outbreak, U.S. Federal Reserve officials last month agreed they needed a pull-out-all-the-stops effort to blunt an economic meltdown as they struggled to comprehend the depth and scope of the risks faced by the world's largest economy.
- Faced with an accelerating health crisis centered around the coronavirus outbreak, U.S. Federal Reserve officials last month agreed they needed a pull-out-all-the-stops effort to blunt an economic meltdown as they struggled to comprehend the depth and scope of the risks faced by the world’s largest economy.
But policymakers at the March 3 and 15th emergency meetings also displayed widespread uncertainty about what was to come, and a certain helplessness over a situation where the actions of health officials and elected leaders would be more central to the economy’s future. The reaction was swift as Fed Chair Jerome Powell convened the emergency sessions. Policymakers agreed to slash interest rates back to zero, broaden access to U.S. dollars for foreign central banks, and restart the massive asset purchases that have come to define monetary policy in a crisis. The first rate cut was announced on March 3 following a videoconference begun on the evening of March 2.
Fed staff spoke of scenarios in which a widening of the coronavirus outbreak and more severe social-distancing actions to curb its spread “would be associated with a greater shutdown of production and disruption of supply chains, larger negative effects on consumer and business sentiment, more significant increases in unemployment, and worsening financial conditions.”
In the end, policymakers agreed to cut interest rates a full point back to near zero and restart buying bonds on a massive scale to restore order to the markets for Treasuries and mortgage-backed securities.A few participants wanted to hold fire “to allow fiscal and public health policy responses to the coronavirus outbreak to take hold,” preserving further action for use if still required at that point, the minutes showed.
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