Bostic of Federal Reserve Says Coronavirus Has Not Changed His View
- Bostic hasn’t changed his views
- Coronavirus claims 414 in Hubei
- US dollar mixed in muted trading
Raphael Bostic, one of 17 Fed officials who set monetary policy, suggested late Monday evening in San Diego that the new virus coming out of China has not changed his view on the economy.
This is crucial because he was one of the first Federal Reserve officials to speak publicly about the issue. By not swaying the views of the Atlanta Federal Reserve Bank President, this shows that perhaps the Federal Reserve is looking above and beyond.
“The Federal Reserve had three rate cuts and right now they are working their way through the economy,” Bostic said, speaking of the interest rate reductions last year. “We’ll just have to wait and see. That was a lot of stimulus for where the economy was and should make it more resilient to these sorts of things.”
Plenty of new cases of the virus
In the Hubei province, Chinese state TV reported there were 2345 new cases a virus and yet another 64 deaths, which brings the total virus-related fatalities in the area to 414 at the end of the day on Monday.
“If this becomes a world issue, with ripples through many countries and many economies, then that’s a different type of event than as I understand it to be today,” Bostic said in an interview on the sidelines of the Global Interdependence Center conference in San Diego. “But given our past recent experience with these sorts of outbreaks, I don’t think that it should; at least it hasn’t changed my outlook or my expectations about our rates path.”
As a result, futures tied to the Feds policy rate now suggest there are two rate cuts likely by the end of the year. However, Bostic suggested that, with inflation being steady, employment near its maximum level, and business surveys and communities showing no sign that they are changing hiring or investment plans, this is a sign that the economy should continue to move forward in the same manner.
The reaction to Bostic’s comments
The reaction over the last 24 hours has been somewhat muted, as it suggests not much has changed in the short term.
The US dollar strengthened a bit against the euro during the trading session on Tuesday, reaching towards the 1.1040 level at the New York open. Alternately, the British pound has rallied against the US dollar, but it should be noted that there are reactions to Brexit statements there as well.
The Australian dollar has strengthened a bit after the RBA announcement, but the US dollar is extraordinarily strong against that currency. This is a direct sign of the damage of the coronavirus and the Chinese economy, which saw the US dollar trade at 0.6725 at the New York open.