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Fed Chairman Powell gave an unannounced speech Friday afternoon in response to the fear and loathing over the coronavirus on Friday. After record highs just over a week ago the Dow had been hit by over 1000 points three days in a row.

Powell Speech

The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.” No chnage there, recall in October Mr. Powell said, the Fed will “act as appropriate to support continued growth.”

Markets have been looking for leadership from the Fed and for a rate cuts. While Powell’s statement offered no assurances and seems implied. Current pricing is for a 50 basis point cut at the Federal Open Market Committee’s March meeting, with a total cut of 100 basis points expected by year’s end.

Former Fed Governor Kevin Warsh, in a CNBC interview earlier in the day, called on the Fed to ease policy and said someone from the central bank should make a statement before the Asia market opening Sunday evening New York time. Warsh said markets are “sending a signal about the real economy.” “They might be wrong, but I’m willing to give them the benefit of the doubt and act now, because the risk-reward seems quite compelling,” he said.;

One only has to look to what Powell said last year about Repos for possible responses.  Back then he said Fed will soon announce measures to add to reserves supply over time and not to don't confuse it with QE as it's a 'technical issue'. Sticking with the mantra he reiterated that policy is never on a pre-set course, it will change as appropriate.

BAck then he said the FOMC will assess outlook and risks on a meeting-by-meeting basis. He said that global developments pose risks to a favorable US outlook. Globally we are seeing the Brexit unrest, Hong Kong and Moscow demonstrations. Further to that we have the trade war between China and America.

“That time is now upon us,” Mr. Powell said. He added that the Fed “will soon announce measures to add to the supply of reserves over time.”

Powell repeated that the Fed monitors financial risks very closely, they're moderate overall. The Fed said job growth is slowing and the yield curve control is something worth looking at. Powell repeated that the Fed isn't in favor of negative rates

Source: TC, Reuters, CNBC

From The TradersCommunity News Desk

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