Federal Reserve: The Death of Patience and Independence?

At the first hint of market disruption resulting from the Coronavirus outbreak, the Fed took the severe,  step to cut rates by 50 basis points. Federal Reserve Chairman Jerome Powell did this while fully conscious of what he was doing.

“We do recognize a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain. We get that,” Mr. Powell said. “But we do believe that our action will provide a meaningful boost to the economy. More specifically, it will support accommodative financial conditions and avoid a tightening of financial conditions which can weigh on activity and will help boost household and business confidence.”

The move was very early, especially considering the state of markets less than two weeks ago. Action today limits action later when it might be more necessary. Time will tell.