Fed’s Mester says coronavirus uncertainty could lead to a demand shock: CNBC

(Reuters) – Cleveland Federal Reserve President Loretta Mester said on Wednesday the supply shock induced by the coronavirus could have demand side implications, if uncertainty on its impact continues.

Mester said she supported the central bank’s decision to cut interest rates by 50 basis points in an interview https://www.cnbc.com/2020/03/04/market-rout-didnt-force-us-rate-cut-but-it-was-noted-feds-mester-says.html with CNBC, adding that the risks around the outlook had risen significantly.

“There’s still a lot of uncertainty about the course of the virus and what impact it’ll have,” Mester said.

“This (rate cut) was really in response to the economy and the outlook and the risks around the outlook.”

Mester, who assumes a voting role this year on the Fed’s policy-setting committee, said the problem induced by the coronavirus is a case of “classic supply shock.”

“Certainly lowering interest rates are not going to get people to start traveling again, their social interactions are not going to be changed by a lower interest rate,” she said.

The situation could morph into something that may affect business, consumer and investor sentiment, Mester added.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.