In response to growing coronavirus fears, Federal Reserve Chair Jerome H. Powell has stated that the Fed will “act as appropriate to support the economy,” The New York Times reports.
According to Powell , the “fundamentals of the U.S. economy remain strong.” He also noted that “the coronavirus poses evolving risks to economic activity” and said that the Fed “is closely monitoring developments and their implications for the economic outlook.”
Powell’s statements come after James Bullard, President of the Federal Reserve Bank of St. Louis, noted that the Fed may be willing to cut rates in response.
“We could cut rates if we got a global pandemic that actually develops with health effects that seem to be approaching the same level as seasonal influenza, but that doesn’t look like the baseline as of today,” Bullard said.
In an article on MarketWatch, economist Peter Morici disagreed with the Fed's plan. Dr. Morici, a business professor at the University of Maryland, stated that "calls for the Fed and other central banks to act quickly are misplaced at best and more likely downright dangerous."
"The most important thing to recognize is that fiscal and monetary policy—a quick tax cut or jolt of infrastructure spending and Fed interest rate cuts and bond purchases—will be akin to passing out candles," Morici said. "They won’t bring back electric power any quicker when the lines go down if utility companies don’t have enough trucks and crew. And shortages of what we need—not consumers and businesses unwilling to spend—is the coronavirus economic challenge."
With the economy already feeling its effects, the housing and mortgage industry has been impacted as well. A report by Markets Insider revealed the growing virus has caused mortgage rates to continue their downward slide. The report found the average rate for a 30-year fixed-rate mortgage hit 3.34% on Monday.
The report says mortgage rates are impacted by the U.S. Treasury Yields, which have fallen as investors will “flock to so-called safe-haven assets” amid fears that the virus will slow global growth.
On Tuesday, the yield on the 30-year US Treasury bond was still at 1.8%, a record low, while the 10-year yield fell to 1.37%, its lowest since 2012.
Realtor.com’s Chief Economist Danielle Hale said that there is limited knowledge on the Coronavirus, as well as its “human and economic impacts.”
“There have been periods when it seemed that the virus might be relatively contained as with the SARS outbreak many years ago,” Hale said. “New information suggests that COVID-19 may be more easily spread and thus will have more wide-spread impacts. But we are still learning, and as we learn more, markets will adjust to price-in this new information.”