Fed’s Kashkari: Markets responding to fundamental uncertainty rather than Fed actions

The coronavirus outbreak could quickly become an economic crisis in the US and cause a recession, Minneapolis Fed President Neel Kashkari told CNN on Tuesday, per Reuters.

“This could be a very long crisis with profound economic implications. The right action is to overreact to prevent the worst outcome,” Kashkari added. “Fiscal policymakers should err on the side of helping as many businesses as possible keep their workers.”

USD reaction

The US Dollar Index largely ignored these comments and was last seen at 99.52, adding 1.55% on a daily basis.

Additional takeaways

“The key is not just the size of response but speed of getting assistance out.”

“Once people are laid off, it takes years for the economy to recover.”

“The rebound will depend on the length of downturn and duration of the health epidemic.”

“Markets are responding to fundamental uncertainty rather than the Fed’s actions.”

“Base case is a mild recession like after September 11 attacks.”

“Market volatility is likely to continue until the course of the outbreak is better known.”

“Health issue and willingness of Americans to social distance from each other will determine the course of the crisis.”