Coronavirus highlights limits of Fed’s power
By John Heltman
The Federal Reserve Board emerged once again Tuesday as a potential antidote to fears about a volatile financial market — this time sparked by the coronavirus outbreak — but both the head of the central bank and analysts warned that the Fed can only do so much. …Karen Petrou, managing partner at Federal Financial Analytics, said the Fed’s move was likely motivated by several factors. One may be a belief that the central bank waited too long to use its monetary policy levers to shore up markets right before the 2008 financial crisis. But another is a realization within the agency that, rightly or wrongly, the centeral bank is being turned tot to do something, and it will be under enormous political pressure if it doesn’t deliver. “I don’t in any way believe that the Fed is responding directly to political pressure, but they have to feel it, too,” Petrou said. “It’s an extraordinarily awkward position, that, if at all possible, they’d rather not be in.”