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They first paralyze the region of the virus outbreak, then they gradually spread domestically, undermining internal trade, consumption, production and the movement of The People. If the virus is still not contained, the process spreads further, including regionally and internationally by disrupting trade, supply chains and travel.
Countries are pursuing their domestic objectives almost regardless of the international consequences, you see this most clearly on the currency front, where with the exception of the United States, the vast majority of countries are hoping to weaken their currencies. I would put the Bank of Japan action in that category.
Countries are pursuing their domestic objectives almost regardless of the international consequences, you see this most clearly on the currency front, where with the exception of the United States, the vast majority of countries hopes to weaken their currencies. I would put the Bank of Japan action in that category.
The Fed's decision to hold off on a rate hike reflects the extent to which it is worried about further destabilization in global financial condition spilling back and undermining the U.S. recovery, they are reluctant to add to international financial fragility - and they wish to limit adverse spillback to the U.S. economy.
It's a really tough policy call, not only do domestic indicators conflict with external ones, but the Fed itself has only a partial handle on the economy - and inevitably so. This is a time of significant policy uncertainty, particularly given that what's on the table is a policy regime change - namely the first interest rate hike in over nine years.
I would have hiked earlier and I would have gotten off zero earlier, but it's easier to say with hindsight, we know that there was a moment when domestic data was relatively strong and international data was okay. Now, the international data is really scary, and therefore the Fed has lost the opportunity when it had some alignment.
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