By Vicki Schmelzer
NEW YORK (MaceNews) – Public health authorities must take the lead in addressing the coronavirus epidemic, though monetary policy has a role to play, Federal Reserve officials said Friday.
Speaking in response to a question about the virus during a series of panel discussions, Chicago Fed President Charles Evans said, “What you described was growing risk to public health and safety that needs to be addressed by the leadership of public health and safety and providing confidence there.”
“Public health safety is paramount. Getting on top of the emerging spread of COVID-19 has to be the highest priority among everything that is taking place today.” Leadership plays a key role in allaying consumer jitters, he said.
The Fed will be paying close attention to the unfolding situation and will respond accordingly, Evans said. “What monetary policy can do, we’ll do, is look at what these risks mean for the path of the economy and us achieving our maximum employment and price stability goal and doing what is needed to get us on track,” he said.
“The most effective tools would be getting some type of liquidity and funds to the people who need it most.” Evans said.
Appearing at the same event, St. Louis Fed President Bullard said, “the optimal response here is a public health response.”
“If we can get control of the virus and put this behind us, everything can return to the very strong economy that we had so far this year,” he said. “This morning’s jobs report said it was still very, very good as per February.”
The public health response represents “a net response of the whole society that will bring the virus under control eventually and then the disruptions that are occurring will abate and the economy will recover,” Bullard said.
He saw potential for “a slowdown for a while,” adding that “it’s unclear right now how severe it will be, but I am pretty confident that we’ll will do better than China.”
The U.S. had more time than China to prepare but nevertheless, the U.S. economy is likely to experience “ripples and disruptions” stemming from the virus, he said, adding, “markets seem to be pricing in the very worst outcome here, and I’m not sure that is warranted given the kind of response that I am describing.”
Cleveland Fed President Loretta Mester said there was an array of economic scenarios that could play out with the coronavirus. Each time the FOMC meets, members assess the current health of the U.S. economy and discuss the risks to the economy, she said.
The Fed is always “thinking about the future” and assessing risks to the economy as “a very important part of policy process,” she said. The Fed also seeks “the best way of communicating” its view to the public.
Mester made her remarks as part of a morning panel before the Shadow Open Market Committee meeting.
In a panel on “Transparency and Communication,” she made the case that “if the Committee were willing to expand what it says in its post-meeting statement, it could give a better sense of its reaction function, its medium-run outlook, the risks around the outlook, and policy rationale.”
“The statement could provide a summary of changes in a consistent set of indicators on inflation, inflation expectations, the unemployment rate, employment growth, output growth, and financial conditions that the Committee regularly assesses to formulate its outlook and view of appropriate policy. The statement would convey whether the accumulated changes in these indicators have materially changed the Committee’s outlook,” Mester said.
Instead of the current method of communication, where each word in the FOMC statement is picked apart for meaning, it might be better to have a “longer statement, but much less weight on each word,” she said, adding, “words are your friend.”