Deidre Everdij had to layoff half the staff at her corporate event planning business in Dania Beach, Fla. In six weeks, her company went from experiencing the best start of what she expected to be her best year to cutting a half-dozen employees from the payroll.
"It's been stunning how fast things have changed," Everdij told me.
What's true for countless businesses is true for investors, too.
On Tuesday and Wednesday the Federal Reserve Open Market Committee will meet. The investment markets expect the agency to cut its short-term interest rate to just one-quarter of one percent. It would bring to a reduction of a full percentage point in the Fed's key borrowing rate in two weeks.
The agency needs to project confidence in an environment where there is very little. Beyond borrowing costs, the Fed will focus on liquidity.
Businesses and investors have moved well beyond worrying about the cost of credit. The concern has quickly shifted to access to credit. Cruise companies started drawing down credit lines last week to make sure they have the cash to stay afloat as business craters.
The Fed's attention will be ensuring the velocity of money as an antidote to the fears fueled by the virus. As important for an economy is the cost of borrowing, so, too, is the willingness of the financial industry and investors to extend that credit.
Rightfully, the priority is public health. Social distancing, isolation and quarantines are the practices public health official say will help address the spread of COVID-19. Understandably, those practices will slow economic activity. The Fed is acutely aware of the balance it needs to strike in its effort to fight the economic infection.
