With much of the economy shut down due to the coronavirus, economists predicted an unprecedented drop in consumer spending, yet the magnitude of the decline surpassed all but the most extreme forecasts. In April, Retail Sales tumbled a record 16.4% from March. The hardest hit segment was clothing and accessories with a decline of 79% from March, while bars and restaurants fell a more modest 30%.
The decline in economic activity due to the pandemic also has caused current inflation levels to fall sharply. The Consumer Price Index (CPI) is a widely followed monthly inflation report that looks at the price change for goods and services. In April, core CPI, which excludes the volatile food and energy components, posted its largest monthly decline ever. In addition, it was just 1.4% higher than a year ago, down from an annual rate of increase of 2.1% last month.
Last Wednesday, Fed Chair Powell said that the Fed will continue to do all that it can to support the economy for as long as needed. He emphasized the need for swift action and warned that over time short-term liquidity issues can develop into more serious long-term solvency problems. When asked about the possibility of a negative fed funds rate, he responded that "this is not something that we're looking at."
Source:Vincent Ortiz from Land Home Financial Services / MBSQuoteline