Fed Policy And The Wuhan Coronavirus

Featured Story

This image has an empty alt attribute; its file name is Bankster-Logo-2.png

When all you have is a hammer, everything looks like a nail. Abe Maslow, the same fellow who developed the “hierarchy of needs” paradigm in human psychology, popularized that phrase to warn scientific researchers about the perils of using tools inappropriate to the task at hand.

It is an especially relevant observation when it comes to Federal Reserve monetary policy since the hammer of interest rates is the central bank’s chief tool. Balance sheet expansion, such as that used to combat recent repo market tensions, also rattle around in their toolbox, of course. But rate policy is their go-to implement to achieve the goals of stable prices and economic expansion.

With this week’s FOMC meeting and Chair press conference, the Fed’s hammer will see a fresh test, and one for which it is hardly suitable: addressing the growing global economic uncertainty around the Wuhan coronavirus. As we outlined last week in our review of a Davos panel on the subject, any vaccine is at best months away. In the interim, China is aggressively moving to quarantine entire cities and limiting mass gatherings. Cases are cropping up around the world, and while the illness seems to be less deadly than SARS it is spreading more quickly at present.

Capital markets are beginning to discount the possibility that the Fed will use their interest rate hammer to offset growing economic uncertainty caused by the outbreak:

#1: 2-year Treasury yields broke to below 1.5% on Thursday to 1.486% and closed Friday at 1.495%, which we interpret as a response to concerns about near term global growth. Why that’s an important development.

  • 2-years are keenly sensitive to a market opinion about future rate policy.
  • This is the first time they are below 1.5% since September/October’s global bond rally related to fears over US-China trade talks and recession worries.
  • Yields here are now just below the current 1.50% – 1.75% benchmark for Fed Funds, implying that the central bank will cut interest rates.

#2: Fed Funds Futures have moved noticeably in the last week, with increasing odds for a 2H 2020 rate cut (or two):

  • Futures discount stable Fed Funds through Q1. The odds that rates remain unchanged through the March meeting have not budged in the last week and run 84% – 86%.
  • The story changes when you look at the odds around the June 2020 FOMC meeting. A week ago the probability of a rate cut by then was 14%; now it is 25%.
  • Last week’s trend to higher expectations for a 2020 rate cut increases as you look at September’s contracts. A week ago, the odds that rates would be lower than today were 37%; now they are 50%.
  • Fast forward to the December 2020 meeting (chart below, courtesy of the CME FedWatch Tool), and the odds that the Fed cuts rates this year rose last week to 68% from 54%. Moreover, the probability that the Fed cuts by 50 basis points or more rose from 17% to 30% last week.

In summary: it is far too early to tell what effect the coronavirus may have on the global/US economy, but markets are increasingly assuming the economic effects of this public health crisis will inform US central bank policy. While the Fed’s rate tool obviously plays no role in finding a treatment or vaccine for the coronavirus, investors expect the FOMC will do its best to inoculate the US economy against its effects. It is, however, still a hammer… Source ZeroHedge

This image has an empty alt attribute; its file name is Bankster-Logo-2.png

StevieRay Hansen
Editor, Bankster Crime

“debtors are hostage to their creditors.”

MY MISSION IS NOT TO CONVINCE YOU, ONLY TO INFORM YOU…

The Birth Pains Are Growing Stronger….

“Unless God has raised you up for this very thing, you will be worn out by the opposition of man and devils”…
My name is Steve Meyers and I need to share a vision and warning that the Lord showed me back in April 2007….

Many of you will ask why I waited so long to share the warning. I didn’t. I shared the story with everyone that would listen from pastors to friends to family to colleagues. Immediately following the initial vision, I called a close friend. I told him to sit down that I had something to tell him. I needed it documented as I knew this was supernatural and from God. As I witness events unfolding today, I need to share the vision again.

This image has an empty alt attribute; its file name is Bankster-Logo-2.png

The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. Steve Meyers, StevieRay Hansen

People’s hearts are troubled, their minds are in a state of confusion, the Bible tells us a time of great delusion that will come upon the people, that time has arrived, the politicians must come up with more significant and more believable lies in order to bring on the antichrist, we have entered the doorstep Tribulation.

“Unless God has raised you up for this very thing, you will be worn out by the opposition of man and devils”…

This image has an empty alt attribute; its file name is AACen.png

Fraud, Banks, Money, Corruption, Bankers, Powerful Politicians, Businessmen


Don't Miss

Central Banks Are Destroying What Was Left Of Free Markets

By StevieRay Hansen

President Reagan memorably said that the nine words you don’t want to hear are “I’m from the government, and I’m here to help.” Governments in all…

Read More

Bankruptcy Tsunami Begins: Thousands Of Default Notices Are “Flying Out The Door”

By StevieRay Hansen

Two weeks ago, when showing the uncanny correlation between defaults and the unemployment rates, we predicted that the number of Chapter 11 filings that is…

Read More

Snyder: Fear Of COVID-19 Has Absolutely Destroyed America’s Future

By StevieRay Hansen

Authored by Michael Snyder via The End of The American Dream blog, Very few people are talking about it, and even fewer are bothering to…

Read More

Wall Street Caught Short Again As “Money Printer Go BRRRRRR To 11”

By StevieRay Hansen

With US stocks soaring to start the week on the combination of Powell’s 60 Minutes affirmation that the Fed’s money printer go BRRRRR to 11 (as Nomura’s Charlie McElligott…

Read More

The National Debt Clock Is Flashing A Major Red Alert!

By StevieRay Hansen

The National Debt Clock is flashing a major warning, Red Alert! this morning while working on another article I happened to glance at this indicator…

Read More

Snyder: It’s Much Worse Than You Are Being Told

By StevieRay Hansen

For a long time I warned that our economic bubble would burst and that we would plunge into a nightmarish economic collapse.  Now it has…

Read More

BoE Warns Of Worst Economic Slump In 300 Years

By StevieRay Hansen

The Bank of England’s Monetary Policy Committee (MPC) “voted unanimously” to keep the banking rate at 0.1% and left its bond-buying program unchanged despite the country’s worst economic slump…

Read More

Brace For A Monday Massacre: Buffett Liquidates All Airline Holdings As Berkshire Sees Another Leg Lower

By StevieRay Hansen

Well, it’s official: there won’t be any “Buy American” op-eds by the Oracle of Omaha this time around. In fact, if anything, they will be…

Read More

“We Are Moving Into The End-Game”: 27 Tankers Anchored Off California, Hundreds Off Singapore As Oil Industry Shuts Down

By StevieRay Hansen

Back in the late fall of 2014, when Saudi Arabia broke up OPEC for the first time and unleashed a torrent of crude oil on…

Read More

Front-Month WTI Crude Crashes Below Zero For First Time Ever

By StevieRay Hansen

Over the last several decades, have we ever seen a year start as strangely as 2020 has? Global weather patterns have gone completely nuts, large…

Read More

StevieRay Hansen

Leave a Comment