Former Morgan Stanley Asia Chairman Stephen Roach said the Federal Reserve is not equipped to help the economy during the coronavirus outbreak.
“Central banks are pulling out a playbook that was designed to deal with financial problems and not to deal with public health problems,” Roach said on CNBC.
“So I really think they’re like a fish out of the water here. They have no idea how to contain or even to understand what may be about to happen in the public health area or the U.S. economy’s response to that.”
The spread of coronavirus in the U.S. could lead to travel restrictions and a significant decrease in people going to public events, similar to what has happened in China, Roach said.
“We are not China, but we are going to be experiencing similar types of actions to deal with what the experts are saying is likely to be increased epidemic in the United States. These are actions that are insensitive to the level of interest rates which are already extraordinarily low,” Roach said.
Roach, who also served as Morgan Stanley’s chief economist, said that the U.S. government’s response to the outbreak has been “flailing” and that it needed to make significant investments in public health.
“We should be investing very heavily in building out our own public health infrastructure, rolling out massive testing on a scale we’ve never done before. We need to bring the scientists in, not the central bankers in, to design these programs. We do need to make sure there’s ample support for liquidity for small- and medium-sized enterprises that might be hit,” Roach said.
Investors seemed to agree with Roach as stocks tumbled in a volatile session after the Fed apparently surprised Wall Street with the half percentage-point cut in interest rates, amplifying fears about the magnitude of the coronavirus' impact on the economy, Reuters said.
All three major U.S. stock market indexes dropped more than 3% after the Fed's first emergency rate cut since the 2008 financial crisis.
Stocks had initially jumped more than 1%, but then dropped as traders worried whether pumping more money into financial markets would address the central problem - a drop in business activity as workers and consumers stay home.
"The rate cut underscores the magnitude of the problem that the global economy is facing," said Peter Kenny, founder of Kenny's Commentary LLC and Strategic Board Solutions LLC in New York.
"Normally, markets would welcome a rate cut, and they were hoping for it. Now that we've got it, the question is, what's next?"
© 2026 Newsmax Finance. All rights reserved.