In an attempt to try and jostle U.S. financial markets that have fallen by 12 percent this week in response to fears over the spread of coronavirus, the White House is reportedly considering another tax cut and urging the Federal Reserve to cut interest rates, according to the Washington Post:
“Trump administration officials are holding preliminary conversations about economic responses to the coronavirus, as the stock market fell sharply again on Friday amid international fears about the outbreak, according to five people with knowledge of the planning.
“Among the options being considered are pursuing a targeted tax cut package, these people said. They have also discussed whether the White House should lean even harder on the Federal Reserve to cut interest rates, though the central bank on Friday afternoon said it would step in if necessary.”
Those plans, however, are unlikely to provide any immediate stimulus to the economy or stock market. Any changes in tax policy would have to be approved by Congress and the Fed is independent of the executive branch and not subject to the whims of any president or administration.
Larry Kudlow, who serves as White House economic adviser, told reporters on Friday that all discussions regarding tax cuts or other policy changes were preliminary, adding:
“There is nothing definite I can report. There’s a lot of conversations in and out of the Oval Office. I was with [Trump] the other day talking about one thing or another. We are dealing with this almost a day at a time, and we have no precipitous actions right now.”
Federal Reserve Chairman Jerome Powell issued a statement Friday that read in part:
“The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”
No matter what the administration is discussing behind closed doors, their options are limited, according to Chris Rupkey, chief financial economist at MUFG:
“They’re really stuck here in terms of trying to find a fix for the plunging stock market. It’s very difficult to stem a panic like this has become. Everyone is just waiting for the next shoe to drop.”
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