By Isaac Cohen*
On February 12, the Dow Jones Industrial Average reached 29,566 points, the highest record ever. In the United States in January, 225,000 new jobs were created, the unemployment rate was 3.6 percent the lowest in half a century and inflation remained below the 2 percent target. At its first meeting, in January, the Federal Reserve adopted a “wait and see” posture, facing what it described as strong macroeconomic performance with crosscurrents and conflicting signals.
In mid January, news from China about the corona virus and its spread to neighboring countries was not alarming, but commodity prices started falling, including copper, oil, other metals and even some agricultural commodities. On Monday February 24, on the news that the virus had spread to South Korea and Italy, all stock indexes in Wall Street dropped into a correction of 14 percent during the week, from the record reached on February 12. Next Monday, the markets rebounded, but before opening on Tuesday, the Federal Reserve announced an emergency interest rate cut of half a percentage point, to a range of between 1 to 1.25 percent. https://www.federalreserve.gov/newsevents/pressreleases/monetary20200303a.htm
Many observers interpreted the central bank decision as “preemptive.” However, there were those who said monetary policy was not effective to contain the virus. What is needed, said an investment advisor quoted in the New York Times (03/01//20), is “a vaccine.”
The expectation in the markets is that the news about the spread of the virus, which has now reached 56 countries, will continue generating volatility and may push the world economy into recession.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.
