–As events related to virus fluid, will “take it one day at a time to see how events unfold”
— Fed cut rates prior to FOMC meeting “because 2 weeks is a long time in this situation”
— Fed tools also include buying along Treasury curve, allowing banks to exercise forbearance
By Suzanne Cosgrove
CHICAGO (MaceNews) – Dallas Federal Reserve Bank President Robert Kaplan Thursday strongly backed the Fed’s action this week to cut U.S. rates by 50 basis points and added that he “wouldn’t presume what the Fed is going to do from here” when the Federal Open Market Committee meets in another two weeks.
Amid concerns of an economic slowdown related to the coronavirus, “two weeks is a long time,” he told reporters after an address to the Chicago Council on Global Affairs. “It’s wise to use our ammunition sooner rather than later,” he said.
Beyond continued cuts in interest rates, the Fed also can consider stimulating the economy by buying Treasuries along the curve, and allowing banks to exercise forbearance, much as it can during a natural disaster like a hurricane, Kaplan said.
As for prices, Kapan said U.S. inflation is muted, and said it’s likely to remain muted. He also noted the U.S. economy was on a fairly solid trajectory before the coronavirus hit. “Ideally, we’ll have a lag, but then get through this,” he said.