Powell’s ‘Whatever It Takes’ Moment Is Here, But Will It Work?

(Bloomberg) --

Financial markets around the world have been roiled by the spread of the novel coronavirus, and it’s unclear what if anything the Federal Reserve and other central banks can do to stop the bleeding. Kathy Jones, chief fixed income strategist at Charles Schwab Corp., joins this week’s “What Goes Up” podcast to discuss the limited impact the Fed may have.

Some highlights of the conversation:

“It’s pretty widely accepted that adding liquidity in this environment probably isn’t going to cure the disease, produce a vaccine or make people go to the movies or the grocery store. Having said that, though, I think one thing it does is it’s a signaling device, right? It says OK, we’re on it, it’s sort of the ‘whatever it takes’ that we got out of (former ECB President Mario) Draghi in Europe that we’re going to provide support and liquidity. And if financial conditions continue to tighten, and the credit spread story is part of that, they can loosen financial conditions a bit by lowering rates. And that can help on the margin. But I think part of the hesitancy we’re hearing from Fed officials is that they know there’s only a limited impact they can have and they don’t want to use all their tools if this thing is going to pass in six weeks or something.”

Bloomberg’s Chris Nagi also joins the conversation to discuss the historic plunge in the stock market.

To contact the editor responsible for this story: Laura Carlson at lcarlson21@bloomberg.net

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