Monetary policy is not completely impotent to address a supply shock
by Rex Nutting
With the coronavirus slamming the stock market and bearing down on the U.S. economy, the pressure is mounting on the Federal Reserve to slash interest rates. After a 14% drop in the stock market, futures markets are now betting on a rate cut on or before the March 18 meeting and probably at least three more rate cuts this year.
Here’s my contrarian take: While many economists and analysts argue that the Fed can’t fix this particular problem, I think easier monetary policy might do some good should the economy weaken because of the virus. That’s because it needs to stop any panic on Wall Street from feeding through to Main Street.