The Fed’s Dilemma
02/28/2020
On CNBC’s Squawk Box, former Fed Governor Kevin Warsh floated the idea of a coordinated emergency response by the world’s central banks over the weekend. At this point, it isn’t apparent who’d be on board with this bold response. Not only are Fed members unconvinced, but European Central Bank (ECB) President Christine Lagarde said on Thursday that she’d need to see a “long-lasting” shock first, adding that we have not reached that point yet. The ECB (even more so than the Fed) has little (if any) ammunition remaining to combat future recessions. So, the markets are screaming for rate cuts, but with policy extremely accommodative already, central bankers are afraid of making a bad situation worse.
