Fed Chair Powell Issues Statement To Calm Coronacrashing Markets

With stocks crashing, yields plunging, supply-chains fraying, China's economy freezing, junk bonds tumbling, credit and equity markets grinding to a halt, and the global economy on the verge of a crisis the likes of which it has not seen since Lehman, moments after both Goldman and Bank of America predicted the Fed would cut rates as soon as next month (and in the case of BofA, an emergency double-cut could come any moment), in a shocking, rare admission that the Fed is "on top of thing", Fed Chair Powell, aware that everyone was looking at the Fed for guidance on what happens next and whether it will conduct an emergency Sunday night global intervention in markets, at exactly 2:30 pm on Friday with 90 minutes left until the close, Powell issued an unprecedented statement meant to do just one thing: calm markets and stop the selloff.

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.

While Powell admitted what everyone knows, namely that the coronavirus “poses evolving risks” to U.S. growth and signaled the central bank is prepared to cut interest rates if necessary to support the expansion, what nobody still knows yet, is whether the current state of events is enough for the Fed to rush with a 25-50bps emergency rate cut as soon as Sunday.

Powell's statement, which was posted on the Fed's website 90 minutes before markets closed for the weekend comes as stocks were in their seventh-straight loss, prompting calls multiple rate cuts by Wall Street banks, and as markets expect more than 1 rate cut in March...

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... yields on U.S. Treasuries are plunging to record lows.

While stocks may have been expecting a far more forceful statement from Powell, they took the rare communication from Powell in stride, and after spiking higher, then grinding lower upon realizing that Powell did not really commit to anything, stocks have continued to rise...

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Gary Anderson 4 weeks ago Contributor's comment

Do they have a virus stopping tool in their toolbox? I didn't think so.