The Federal Reserve has instituted quantitative easing and will drop interest rates to spark borrowing following an emergency vote about the coronavirus’ effect on the economy. The vote to infuse the economy with $700 billion was unanimous while one member, Cleveland Fed President Loretta Mester, was the lone dissenter to the interest rate drop.
President Trump gave rare praise to the Fed, saying he was “very happy” with their actions during a Sunday coronavirus press conference. Meanwhile, Treasury Secretary Steve Mnuchin said he does not anticipate a full-blown recession occurring as a result of the coronavirus threat.
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed said in a statement, the New York Times reported.
“The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses,” the bank added. “The committee will continue to closely monitor market conditions and is prepared to adjust its plans as appropriate.”
The stock market has been trending downward for two weeks now as businesses face massive losses from reactions to the coronavirus as well as trade suffering from reduced global movement. Consumers are still buying, though much of what they’re purchasing pertains to the coronavirus. Grocery store shelves are being emptied around the nation.
President Trump declared Sunday as a National Day of Prayer, prompting many Americans to turn to God for assistance through this crisis. Finger-pointing is prevalent with China saying the U.S. Army started the coronavirus outbreak and Norway cutting off travel in a snipe at the United States healthcare system.
The question that remains is whether or not the Fed acted too slowly. Despite the President’s praise, the Fed should have acted on this at least a week ago when they realized the stock market was in the process of crashing. While stock prices are expected to recover in the long term, too much wealth was wiped away. They could have propped up both the stock market and the public sentiment with a decisive move earlier. Instead, they waited until much of the damage was already done.
The U.S. economy will recover from this. The question is when, and that cannot be answered until we start seeing signs that the coronavirus threat is subsiding. Until then, American must tighten up and wait out the economic storm.