Fed's Evans: Fed was very well positioned but felt rate reduction would help boost confidence

Fed's Evans says he thought fed was very well positioned but felt rate reduction would help boost confidence given rising risks, possible economic weakening.

• Expectation is that coronavirus will have a "short-lived imprint" on US.
• Says he expects perhaps a quarter or half-year of slowing growth, with a 'v-shaped' rebound.
• May have been a missed opportunity in this expansion to not have put the countercyclical capital buffer in place earlier.
• Says financial markets are reacting to "everthing that is going on," not just the Fed's actions.
• Says Fed is trying to cushion any financial distress that might come about, but so far it is small.
• Says possibility of again hitting zero rates means fed should use its ammunition.
• Says Fed rate cut shows it is "part of a team" in the crisis response.
• Says he feels economy remains strong, with trade risks lifting.
• Says addressing climate change is "larger" than central banks, but those institutions can provide analysis and insight.
• Says expectation is that interest rates are going to remain low.
• Says no sense inflation is going to spike on the basis of what the Fed is doing now.

Market implications

The Federal Reserve's emergency rate cut has dented the US dollar's advantage over the FX space with respect to the carry. However, given its safe-haven status and uncertainties surrounding the spread of the coronavirus, it is expected to hold its ground.