The epidemic warns of the significant impact of property prices if the epidemic escalates

The epidemic warns of the significant impact of property prices if the epidemic escalates
The epidemic warns of the significant impact of property prices if the epidemic escalates

The Federal Reserve issued a stern warning on Friday that if the coronovirus epidemic deepens, the commercial property market among industries may be the toughest.

The Fed made a statement in its half-yearly financial stability report, in which it poses a risk to the US banking system. America and the economy in general. The document exposed the rush of the central bank to intervene in the markets and temporarily delayed regulations on financial companies amid the Covid-19 crisis.

If the epidemic report states that economic value declines if the epidemic increases unexpectedly, economic consequences are more unfavorable or tensions of the financial system re-emerge. He cited being susceptible to a drop in the price of commercial real estate because "the values ​​were high relative to the core principles before the epidemic."

Although regulations imposed after the 2008 financial crisis have helped make Wall Street more resilient, vulnerabilities in the financial system still serve to increase the economic shock of the virus, according to the report.

The review also found that "prices of commercial properties and cultivation were very high relative to their income on the eve of the epidemic, suggesting that their prices could clearly decline."

The sudden closure of the global economy created uncertainty in the financial markets that overturned trading in everything from treasury stocks to junk bonds and drastically changed share prices. Markets settled when the Federal Reserve filled the financial system with liquidity, but President Jerome Powell said in a speech this week that people still responsible for financial and monetary policies do not act if the economy is of unprecedented risk. Have to face. have to do it.

"Additional financial support can be costly, but it helps prevent long-term economic damage and leaves us with a strong recovery," said Powell for a virtual event organized by the Powell Institute for International Economics.

To devastate the economy in the wake of the coronovirus crisis, the Federal Reserve effectively cut short-term interest rates, bought approximately $ 2 trillion in treasury and mortgage-backed securities, and announced. Plan for nine emergency loan programs. , Five of which are in operation. It has funded hundreds of billions of dollars to foreign central banks through exchange and temporary purchases of treasury securities.

The Fed has relaxed some regulations to encourage banks to give loans to families and businesses affected by the epidemic.

Governor Lyle Brainard said, "Hard-hitting early interventions have been effective to overcome liquidity pressures, but we will monitor intimacy among highly leveraged commercial borrowers." A statement on Friday.

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