3/17: MetroIntelligence Economic Update by P. DUFFY

Federal Reserve lowers rates to zero, relaxes rules for banks, and will inject more liquidity into the financial system

In a Sunday emergency session, the Federal Reserve took several steps to address the economic fall-out from measures to contain the spreading coronavirus.  These include lowering the Federal Funds rate one full point to 0-0.25 percent, setting bank reserve requirement ratios to zero, allowing banks to borrow from the discount window for as long as 90 days, and the launch of more quantitative easing with $700 billion in asset purchases, including $500 in Treasury securities and $200 in mortgage-backed bonds.



Univ. of Michigan:  Consumer sentiment index falls 5.0 percent in early March survey, down 2.5 percent year-on-year

The University of Michigan’s consumer sentiment index fell in early March 95.9, the lowest level since October 2019, due to the spreading coronavirus and the steep declines in stock prices. Importantly, the initial response to the pandemic has not generated the type of economic panic among consumers that was present in the runup to the Great Recession. Nonetheless, the data suggest that additional declines in confidence are still likely to occur as the spread of the virus continues to accelerate.



Morning Consult:  Daily index of consumer sentiment down 8.27 percent since start of year

As of Monday, 3/16/20, the Morning Consult Index of Consumer Sentiment (ICS) fell to 105.09. Since Friday, the ICS fell 3.58 percent over the weekend and is down 8.27 percent since January 1. Notably, 27 percent of respondents believe they are worse off financially than 12 months ago, which is the second highest daily value recorded since January 2018. The all-time high is 28 percent, which occurred in December 2018 and January 2019.