Emergency Coronavirus Response Package Enacted, Fed Attempts to Blunt Economic Impact with Interest Rate Cut

Trump signs Coronavirus bill x475

This week congressional policymakers overwhelmingly passed, and President Trump signed, an $8.3 billion emergency spending package to combat the coronavirus outbreak in the U.S. – after the Fed reduced interest rates by a half-point amid early signs of economic disruption.

  • The president signed the emergency funding bill Friday morning. “We’ve signed the 8.3 billion,” Trump said. “I asked for two and a half and I got 8.3 and I’ll take it.”   (The Hill, March 6)  Photo above:  President Trump, with Secretary of Health and Human Services Alex Azar, signs the coronavirus bill into law.
  • The package – H.R. 6074 (116) – will bolster vaccine development and research, increase equipment stockpiles, and support state and local health responses to a virus that has sickened more than 160 people in more than a dozen states.  (NY Times U.S. coronavirus map and Center for Disease Control and Prevention updates)
  • As questions remain about the severity and spread of the illness, the stock market continued to experience historic gyrations this week, with falling yields exerting wide-ranging effects on borrowing costs and bank profitability. (Wall Street Journal, March 5)
  • In an effort to contain the coronavirus’s economic fallout, Fed Chairman Jay Powell announced on March 3 a cut in the federal funds rate cut to a range of 1 to 1 ¼ percent – the largest emergency cut to interest rates since the 2008 financial crisis.  The Fed’s Open Market Committee is scheduled to meet again on March 17-18 to issue updated economic forecasts and any further change to the current federal funds rate.
  • Powell said, “The virus and the measures that are being taken to contain it will surely weigh on economic activity both here and abroad for some time.”  He added, “We are beginning to see the effects on the tourism and travel industries, and we are hearing concerns from industries that rely on global supply chains.”  He added, “We don’t think we have all the answers, but we do believe that our action will provide a meaningful boost to the economy.”  (Powell’s press conference transcript). 
  • The Federal Reserve’s latest nationwide survey of business conditions shows that that half of the central bank’s districts — Philadelphia, Cleveland, Richmond, Chicago, Dallas and San Francisco — were reporting impacts from the coronavirus in tourism and manufacturing chains.  (The Fed’s Beige Book, March 4)
  • The U.S. Travel Association (USTA) on Tuesday issued a report that supports the Fed’s findings.  USTA predicts a 6 percent plunge over the next three months in international inbound travel to the United States, which could result in a loss of two to three billion dollars – the largest dip in global visitation since the financial crisis. About 79.3 million international visitors came to the U.S. last year.  (USTA Travel Trends Index, March 3)
  • [The Real Estate Roundtable is part of the Visit U.S. Coalition, led by the U.S. Travel Association (USTA) and the American Hotel and Lodging Association.]
  • The potential impact of coronavirus on the economy and commercial real estate was part of a recent discussion between Real Estate Roundtable President and CEO Jeffrey DeBoer and Brookfield Property Partners Chairman Ric Clarke at Colorado University’s Annual Real Estate Forum (see photos here). DeBoer was also interviewed partly about the coronavirus outlook by Rosen Consulting Group’s Chairman Ken Rosen during the Pension Real Estate Association’s Spring conference this week.
  • Coronavirus-related updates and resources are available to the commercial real estate industry through the RE-ISAC’s #COVID Section, which includes:
  • Coronavirus Disease 2019 (COVID-19) Situation Summary, last update March 3.
  • Novel Coronavirus (2019-nCoV) in the U.S., March 5 update.

The potential impact of coronavirus on the health of global markets and the U.S. economy; commercial real estate sectors and the industry’s response; and how it may affect the routines of millions in American society, will be a focus during The Roundtable’s March 31 Spring Meeting in Washington, DC.

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Global Stock Markets Plunge Over Coronavirus Threat; U.S. Policymakers and CRE Industry Prepare for Potential Disruption

Deepening concerns over the international spread of the coronavirus (COVID-19) have prompted U.S. policymakers to consider measures for combating the potential public health and economic repercussions of the global disease, as the commercial real estate industry braces for potential disruption.

Dramatic drops in international stock markets this week reflected investor anxiety over the potential global economic impact of a virus that has, so far, infected more than 83,000 people in at least 56 countries and killed more than 2,800 – with no vaccine yet in sight.  (New York Times and Axios for coronavirus daily updates)

Today, the World Health Organization raised its risk level of the global coronavirus to “very high” – the most serious assessment in its four-stage alert system. “This is a reality check for every government on the planet. Wake up. Get ready. This virus may be on its way,” said Dr. Michael J. Ryan, deputy director of W.H.O.’s health emergency program.  (The Hill, Feb. 28)

Dr. Nancy Messonnier – director of the National Center for Immunization and Respiratory Diseases of the Centers for Disease Control and Prevention (CDC) – on Feb. 25 told reporters, “We really want to prepare the American public for the possibility that their lives will be disrupted.”  She added, “Ultimately we expect we will see community spread in the United States. It’s not a question of if this will happen, but when this will happen, and how many people in this country will have severe illnesses.”   (CDC Coronavirus Resources)

There are now 62 confirmed cases of novel coronavirus in the United States, Messonnier stated during a press briefing today.   The limited guidance that has been distributed to date has primarily been directed at health care professionals, not specific industries.

Trump administration health officials on Tuesday told Senators during a closed-door briefing that a vaccine, although being rushed into clinical trials, could take more than a year before one would be widely available to the public.  (Washington Post, Feb. 25)

The Trump Administration initially requested $2.5 billion to combat the spread of the virus.  Congressional appropriators are working this weekend on an emergency coronavirus spending package of $6 billion to $8 billion and intend to take action on the House floor next week. House Speaker Nancy Pelosi said bipartisan discussions on a final figure are getting “close.”  (PolticoPro, Feb. 28)

Federal Reserve Board Chairman Jay Powell issued a statement today to ease investor concerns.  “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. 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,” Powell stated.  (The Fed, Feb. 28)

Just earlier in the week, Fed officials said it was too soon to ascertain the potential adverse effect of the coronavirus on the U.S. economy.  Fed regional presidents said they are carefully monitoring the progression of the virus and how disruptions in global supply chains may affect the U.S. before considering a decrease in interest-rates.  (Wall Street Journal, Feb. 25)

As stocks are on track for the biggest weekly losses since the 2008 financial crisis, investors have reassessed the chances that the Federal Reserve will lower interest rates to as soon as March  (Wall Street Journal, Feb. 27)

CRE Industry Concerns

Roundtable President and CEO Jeffrey DeBoer said, “Owners and managers of all types of buildings are taking actions to better understand the potential contagion and how to best help building occupants, visitors and employees prevent further spread of the coronavirus. This viral threat to lives, businesses and economies is a top concern for our industry and we stand ready to assist public health officials as they recommend.”

The Roundtable’s Homeland Security Task Force (HSTF) and the Real Estate Information Sharing and Analysis Center (RE-ISAC) are in close contact with the Department of Health and Human Services (HHS) and the Centers for Disease Control and Prevention (CDC) to provide useful information to the real estate industry on the coronavirus threat as it continues to evolve. 

The Roundtable’s HSTF & the RE-ISAC will also host a conference call on Monday, March 2 with CDC’s Deputy Director for Infectious Diseases, Dr. Jay Butler.  

Coronavirus-related updates and resources are available to the commercial real estate industry through the RE-ISAC’s #COVID Section, which includes these recent reports:

  • Coronavirus Disease 2019 (COVID-19) Situation Summary, last update 25 Feb.
  • 2019 Novel Coronavirus (2019-nCoV) in the U.S., 26 Feb update (update will be provided later today and in tomorrow’s Daily Report).

Other resources include:

  • The Centers for Disease Control and Prevention (CDC) web page includes an interim guidance based on what is currently known about the Coronavirus Disease 2019 (COVID-19). The interim guidance may help prevent workplace exposures to acute respiratory illnesses, including nCoV, in non-healthcare settings. The guidance also provides planning considerations if there are more widespread, community outbreaks of COVID-19.

The Roundtable’s next membership meeting is currently scheduled for March 31 in Washington, DC (Roundtable-level members only).