Fed faces headache, taps epidemiologists in hunt for policy clues
WASHINGTON/SAN FRANCISCO: The escalating coronavirus outbreak is giving the U.S. Federal Reserve a policy headache like never before: how to judge the potential impact on the economy in the absence of reliable data on how fast the flu-like illness is spreading across the United States.
The central bank slashed interest rates by half a percentage point a week ago in a pre-emptive bid to shield the U.S. economy from the fast-evolving global epidemic. But Fed Chair Jerome Powell also said it was too early to tell the impact it would have, with most of the data the Fed typically relies on being too backward-looking to be of use. Instead, the Fed is turning to new methods to assess the likely spread and get a read on local responses as policymakers weigh what further action may be needed in the days and weeks ahead.
“I am talking extensively to epidemiologists and healthcare experts across the country…to try and interpret what we are seeing and what we are likely to see,” Dallas Fed President Robert Kaplan said in Chicago last week. For real-time impacts, the Richmond Fed has reached out to city and county executives “to understand what this might look like in our cities,” research director Kartik Athreya told Reuters on Friday. Minneapolis Fed economists are monitoring credit card transactions while San Francisco Fed researchers are now tracking a daily measure of consumer sentiment published by Morning Consult. - Reuters