Fed Is Losing Its Credibility to Coronavirus
The central bank is failing to act in the face of a threat to world growth, and for no good reason.
That wasn’t helpful.
Photographer: Andrew Harrer/BloombergRichard Clarida, the vice chair of the Federal Reserve, made a series of perplexing statements on Tuesday. First, he said that “the economic disruptions from China could spill over to the rest of the global economy.” Nonetheless, he then made clear that despite the rising threat the coronavirus poses to world growth, the Fed isn't planning to cut interest rates anytime soon. This raises the question of what the Fed perceives to be the costs of cutting interest rates. There are three possible arguments.
First, the Fed might believe that the U.S. has safely contained the coronavirus, an argument made Tuesday by Larry Kudlow, director of the National Economic Council.