Magazine April 20, 2020, Issue

The Fed and the Virus

(Kseniya Ovchinnikova/Getty Images)
It can best help the economy by preparing for recovery

In the days when the coronavirus was just beginning to dominate the news, analyses of its economic impact emphasized that its spread counted as a “supply shock.” The economic effect of disruptions to supply chains would be similar to that of the 1970s oil embargo. A sudden drop in productivity would reduce our economy’s output of goods.

It followed that the Federal Reserve would be nearly powerless to undo the damage. The Fed typically combats recessions by acting on the “demand” side of the economy. By reducing interest rates, it can, for example, lead more people to buy houses, and their

Something to Consider

If you enjoyed this article, we have a proposition for you: Join NRPLUS. Members get all of our content (including the magazine), no paywalls or content meters, an advertising-minimal experience, and unique access to our writers and editors (through conference calls, social media groups, and more). And importantly, NRPLUS members help keep NR going.

If you enjoyed this article and want to see more content like this, we have a proposition for you: Join NRPLUS.

 

Join Now
Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

In This Issue

Coronavirus Issue

Books, Arts & Manners

Sections

The Week

The Week

Trump has every right to boast about his TV ratings, but he really ought to give the virus some of the credit.

Recommended

The Latest