Powell Flails Again: Wuhan Flu Over the Cuckoo’s Nest
Rescheduling this week’s two-day FOMC meeting into a few hours this afternoon, the Fed announced lowering the funds rate by 1 percentage point to a range of zero to 25 bp, and new asset purchases of $500 billion in Treasuries and $200 billion in MBS, on an unspecified schedule. The Fed also eliminated bank reserve requirements, indicated forbearance on capital and liquidity buffers and announced FX coordination with other central banks. This is all in step with what we think is a generally useful atmosphere of panic developing in the US, manifesting the national resolve that will ensure the economic fallout of the Covid-2019 crisis remains a valley that can be looked across. The sudden and slipshod nature of the Fed’s announcements, and Powell’s atrocious conference call performance are big negatives, but the asset purchase program is indeed QE4, and it will de-risk the markets just as its predecessors successfully did.