Fed slashes rate in bid to lower economic risks
Closures tied to virus mount
WASHINGTON — The Federal Reserve took emergency action Sunday to help the economy withstand the coronavirus by slashing its benchmark interest rate to near zero and saying it would buy $700 billion in Treasury and mortgage bonds.
The Fed’s surprise announcement signaled that it’s worried the viral outbreak will depress economic growth in coming months and that it is prepared to do whatever it can to counter the risks. The central bank cut its key rate by a full percentage point — to a range between zero and 0.25% — and said it would keep it there until it feels confident that the economy can survive the sudden near-shutdown of economic activity in the United States.
The worldwide outbreak has sickened more than 156,000 people and left more than 5,800 dead, with thousands of new cases confirmed each day. The death toll in the United States climbed to 64, while infections neared 3,000.
The Centers for Disease Control and Prevention said in a statement Sunday that it recommends that gatherings of 50 people or more be canceled or postponed throughout the country for the next eight weeks because large events can fuel the spread of the disease. It added that, at any event, proper precautions should be taken, including making sure people are washing their hands and not getting too close.
But the statement from the CDC also said the recommendation does not apply to “the day to day operation of organizations such as schools, institutes of higher learning, or businesses.”
Meanwhile, officials across the country curtailed elements of American life Sunday, with governors closing bars, restaurants and schools. At the same
time, long airport lines for virus screenings raised doubts about whether the government is prepared to respond to the crisis.
Parts of America already look like ghost towns, and others are about to follow. Theme parks have closed, Florida beaches have shooed away spring break vacationers, Starbucks has said it will accept only drive-thru and takeout orders, and the governors of Ohio and Illinois ordered that bars and restaurants be closed. New York City, New Jersey and elsewhere are considering similar measures.
“The time for persuasion and public appeals is over,” said Illinois Gov. J.B. Pritzker, Democrat. “This is not a joke. No one is immune to this.”
ECONOMIC PACKAGE
In a bid to stem some of the economic uncertainty, the central bank will buy at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities. This amounts to an effort to ease market disruptions that have made it harder for banks and large investors to sell Treasurys as well as to keep longer-term borrowing rates down. The new purchases will be sim- ilar to the several rounds of “quantitative easing” that the Fed conducted during and after the recession to bolster the financial system and the economy.
The Fed is also joining in a coordinated global action with the the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank to provide cheap dollar credit to banks. This move is intended to ensure that foreign banks continue to have access to dollars that they lend to overseas companies.
In an audio news conference Sunday night, Chairman Jerome Powell explained the Fed’s actions, in part, by noting that “when stresses arise in the Treasury market, they can reverberate throughout financial markets and the entire economy.”
All told, the Fed’s response is intended to keep financial markets functioning and maintain lending to businesses and consumers. Otherwise, as revenue dries up for small businesses that have suddenly lost customers, those employers could be forced to lay off workers or even seek bankruptcy protection in some cases.
“This is a break-the-glass moment” for the Fed, said Mark Zandi, chief economist at Moody’s Analytics. “They are throwing everything they’ve got at this. My sense is they must be nervous about the credit system not functioning properly. They are trying to shore up confidence.”
The move drew praise from Trump, who as recently as Saturday had accused the Fed of not acting quickly or aggressively enough.
“It makes me very happy,” Trump said as he opened a White House briefing on the coronavirus. “I think that people and the markets should be very thrilled.”
Elsewhere, the United Arab Emirates and Saudi Arabia announced stimulus measures, and Chinese cities are giving cash to residents to bolster their economies.
AIRPORTS CROWDED
State and local officials criticized Trump and his administration Sunday over long lines of returning international passengers at some U.S. airports that could have turned them into coronavirus carriers as they tried to get home.
Chicago Mayor Lori Lightfoot was critical of the administration for allowing about 3,000 Americans returning from Europe to be stuck for hours inside the customs area at O’Hare International Airport on Saturday, violating federal recommendations from the CDC that people practice “social distancing.”
The passengers, many of them rushing home because of fears they would be stuck in Europe, were screened by federal customs and homeland security agents for coronavirus symptoms before they were allowed to leave the airport.
Long lines also formed Saturday in Boston, Dallas and others of the 13 airports that are accepting return flights from Europe.
“People were forced into conditions that are against CDC guidance and are totally unacceptable,” Lightfoot said. Conditions nationwide appeared to be better Sunday, though at O’Hare passengers were being kept on their planes to better manage the flow through customs.
Sen. Ed Markey, D-Mass., on Sunday wrote a letter to top Customs and Border Protection officials and the CDC, asking what authorities are doing to “prevent the spread of this dysfunction.”
Elizabeth Pulvermacher, a University of Wisconsin student, arrived Saturday at O’Hare from Madrid, where she had been studying. The customs process made her feel “unsafe,” she said.
“The whole idea is getting rid of the spread of coronavirus, but there were hundreds and hundreds of people in very close proximity,” Pulvermacher said.
Dr. Robert Murphy, executive director of Institute for Global Health at Northwestern University, said he was “appalled” by what he saw Saturday at O’Hare.
“If they weren’t exposed to covid-19 before, they probably are now. From a public health perspective, this is malpractice,” Murphy said in a statement Sunday. “The lack of preparation and concern is unfathomable. This is not ‘poor planning.’ This is ‘no planning.’”
Acting Customs and Border Protection Commissioner Mark Morgan said in a written statement Sunday that the agency is making improvements to its procedures, but that it must “balance our efficiencies with ensuring the health and safety of all American citizens through enhanced medical screening.”
Separately, United Airlines announced Sunday that it will slash 50% of its flying capacity in April and May and warned the cuts could extend into the peak summer travel
season.
United said Sunday night that it expects planes to be only 20% to 30% full at best, down from nearly 90% before the virus hit.
BARS, RESTAURANTS SHUT
For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia. The vast majority of people recover.
And that may have given some people false hope, causing them to venture into crowds that Dr. Anthony Fauci, who is the federal government’s top infectious disease expert, and others would prefer they avoid. Even if people don’t become visibly ill, they can still carry the disease and spread it to others.
In New Orleans and Chicago, people clad in green for St. Patrick’s Day packed bars and spilled onto crowded sidewalks on Saturday even after the cities canceled their parades.
“I’m not about to put my life on hold because this is going around,” Kyle Thomas told the Chicago Sun-Times.
Thomas, a nurse from Colorado, said he had flown to Chicago to celebrate St. Patrick’s Day with friends and thought people might be “overreacting.”
In New Orleans, Syd Knight, 86, celebrated despite the public health warnings and the higher risk she faced because of her age.
“The Lord will take care of us all,” Knight told The Times-Picayune/New Orleans Advocate.
In Boston, the mayor shut down all beer gardens and asked nightlife venues to close by 11 p.m.
Ohio Gov. Mike DeWine, a Republican, ordered that all bars and restaurants in his state be shut down effective at 9 p.m. Sunday. “We’re two days from St. Patrick’s Day, when people get together and crowd into bars,” he said. “We are at a crucial, crucial stage.”
DeWine said he had no idea how long the shutdown would last. “It will be in effect as long as it needs to,” he said.
New York City, which has the nation’s largest public school district, announced that schools will be closed starting today, joining much of the rest of the country. Mayor Bill de Blasio had originally balked, but under pressure from Gov. Andrew Cuomo and others, he said Sunday, “I became convinced over the course of today that there is no other choice.”
In Florida, the Walt Disney World and Universal Orlando theme parks were closing Sunday night for the rest of the month, joining their California siblings, which already closed. Farther south, Miami Beach and Fort Lauderdale officials announced that they are closing their beaches, where thousands of college spring-breakers from around the world have flocked. The cities also ordered that restaurants and bars be closed by 10 p.m. and that crowds be kept below 250 people.
“We cannot become a petri dish for a very dangerous virus,” Miami Beach Mayor Dan Gelber said. “Spring break is over. The party is over.”
But not all government officials were as concerned. Oklahoma’s Republican Gov. Kevin Stitt tweeted a picture of himself and his children at a crowded restaurant Saturday night.
Rep. Devin Nunes, R-Calif., on Sunday urged Americans
to “go to a local restaurant” during the coronavirus crisis, ignoring the advice of health experts and Trump administration officials who have warned the public to stay home as much as possible in an effort to slow the spread.
MEASURES AROUND WORLD
Globally, daily life ground to a halt amid new travel restrictions, border shutdowns and sweeping closures of restaurants and bars.
Italy, the worst-hit European country, reported its biggest day-to-day increase in infections — 3,590 more cases in a 24-hour period — for a total of almost 25,000. It also reported 368 more deaths, which brought its overall toll to 1,809.
“It’s not a wave. It’s a tsunami,” said Dr. Roberto Rona, who’s in charge of intensive care at the hospital in Monza, Italy.
In Spain, police patrols and long lines for food marked the first day of a nationwide quarantine. In the Philippines, soldiers and police sealed off the densely populated capital of Manila from most domestic travelers. Austrian Chancellor Sebastian Kurz announced plans to limit movement throughout his country. And Lebanon’s government ordered a lockdown in the country, closing down Beirut’s famed seaside corniche.
Ireland ordered all pubs and bars to close for two weeks — including on Tuesday, St. Patrick’s Day — and urged people not even to hold house parties. Two pub industry groups had warned of the “real difficulty” in keeping people apart in the country’s famous watering holes.
Iran said Sunday that the country’s coronavirus death toll had reached 724 as a leading official suggested that the health system was reaching its breaking point.
Dalia Samhouri, a regional official with the World Health Organization, said both Iran and Egypt, two of the most populous countries in the Mideast, were likely underreporting cases because infected people can still show no visible symptoms. Iran says it has nearly 14,000 virus cases while Egypt has reported 110 cases, including two fatalities.
VACCINE EVALUATION
A clinical trial evaluating a vaccine designed to protect against the new coronavirus will begin today, according to a U.S. government official.
The first participant in the trial will receive the experimental vaccine today, the official said, speaking on the condition of anonymity because the trial has not been publicly announced yet. The National Institutes of Health is funding the trial, which is taking place at the Kaiser Permanente Washington Health Research Institute in Seattle, the official said.
Public health officials say it will take a year to 18 months to fully validate any potential vaccine. Information for this article was contributed by Christopher Rugaber, Paul Wiseman, Martin Crutsinger, Terry Spencer, Teresa Crawford, Mallika Sen, Vanessa Alvarez, Christopher Weber, Eugene Johnson, John Seewer, Frances D’Emilio, Joseph Wilson, Geir Moulson, Iain Sullivan, Sylvie Corbet, Yanan Wang, Andrew Taylor, Jim Gomez and Zeke Miller of The Associated Press; and by Katie Mettler, Kim Bellware, Lateshia Beachum, Felicia Sonmez, Laura Meckler, Loveday Morris, Darryl Fears, Ellen Nakashima, Chico Harlan, Paul Schemm, Eric Yoder, Mark Guarino, Derek Hawkins, Hannah Knowles, Katherine Shaver, Nick Miroff and Hannah Natanson of The Washington Post.
In an audio news conference Sunday night, Chairman Jerome Powell explained the Fed’s actions, in part, by noting that “when stresses arise in the Treasury market, they can reverberate throughout financial markets and the entire economy.”