The prevailing opinion is the Federal Reserve will note the downside risks caused by the coronavirus and won’t cut rates in March, but bets are hedged for later in the year.
But some analysts say a rate cut will be needed soon. The coronavirus will strike at consumer confidence, which will cause a drop in spending, said Dan Geller, Analyticom LLC founder. “Since personal consumption makes up 70% of GDP in the U.S., the Fed will have to cut the funds rate to stimulate the economy and restore consumer confidence,” he said.
The illness “certainly has tilted the odds from a slight chance of a rate increase in the last week of January to a one in seven chance of a rate cut in mid-March,” said Robert R. Johnson, professor of Finance at Heider College of Business of Creighton University. “If the conoravirus becomes a true global pandemic and isn’t under control by the date of the Fed meeting, the Fed would likely cut rates in an attempt to stimulate the economy.”
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