This week the Federal Reserve cut interest rate by .05%. The cut in interest rate to slow down the coronavirus epidemic economic impact. The reduction in interest rate has had little effect because we don't know what is going to happen to the world's economies. Unlike past health scares SARs and Zike, the United States health structure had the testing infrastructure in place. We could test people for SARs, and Zike so we had scientific data on how fast these diseases were infecting people. As of today, we don't have enough test kits for coronavirus; thus, we don't know how quickly the virus is spreading.
The U.S. government is probably going to use fiscal stimulus to prop-up the economy over the next year. This action will give the current administration cover for this election year. Economic stimulus means that the government will print more money and increase the national debt. The Trump tax cut in late 2018 will grow more significant than the $10 trillion deficit projected by the government budget office in 2028. The result could be higher inflation in the future.
The financial pundits mention how the world supply chain disruption impacts the U.S. economy. Companies like Apple, Microsoft, Exxon, for example. The pundits fail to mention the impact on millions of U.S. small business owners. My wife owns a family restaurant in Los Angeles. Over the last ten days, her restaurant has experienced a 30% drop in customers. The reduction is a significant impact on her and the staff she employs. She is now looking to reduce hours for her team over the next 90 days, which in turn will impact the income to her workers. If people cannot gather and go out to spend their money, the economy is going to slow down.
Until the Center for Disease Control can test people, it may result in tough economic times very shortly.