Comments from Powell

  • Closely monitoring virus

Unscheduled statement from the Fed chair. Full text:

The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.

The headlines look ho-hum but when I read that in context, it sounds like a hint at cutting rates.

As we wrote earlier today, the market is already fully pricing in a March cut from the Fed and a few firms -- including Barclays and Goldman Sachs -- are already predicting one.

The Fed can't print vaccines. They have a bazooka in economic crisis, not in pandemics. The market isn't going to turn on central bank action.

I've been thinking a lot about how the market will react if/when the central banks swoop in. It's going to boost confidence, but I think it will be short-lived.