FED appraises COVID-19`s impacts
In statements made to the media, members of the US Federal Reserve have expressed concerns regarding the virus`s strongly negative impact on the American economy. Vice-president Richard Clarida assured he expects to see a severe impact on the economy, especially in demand, which could generate deflationary pressures. In light of this, Clarida assured the FED counts on enough tools to avoid this scenario and only expects a deceleration concerning inflation, not a contraction. Last Thursday, the FED announced a new emergency program of $2.3 trillion dollars in loans to support small businesses in the economy. On his part, President of the FED in Minneapolis Neel Kashkari said he expects recovery will be slow and not immediate, as some models suggest. Kashkari acknowledged that social distancing measures will be gradually lifted, affecting the ability to recover; simultaneously, he does not rule out the possibility of seeing intermittent halts in activity throughout the country in the next 18 months while a vaccine or a successful treatment of the virus is discovered. He concluded that, given the scenario, the economic support that has been announced up to now may need to increase.
OPEC reaches an agreement
The Organization of the Petroleum Exporting Countries (OPEC) and its members reached an agreement on Sunday to cut global production in 9.7 million daily barrels with the intention of stabilizing the market. This is a historical agreement, which in markets has been perceived as too little, too late. The cutback represents close to 10% of total global production, but most recent measures suggest that demand has fallen 35%, which would prevent OPEC cutbacks to help avoid inventory growth and storage saturation. In any case, the cutback will help countries that are dependent on oil to avoid a deeper crisis.