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US financial chief to chair FSOC amid significant volatility

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US financial chief to chair FSOC amid significant volatility

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Photo: Al Drago/Bloomberg/Getty

The Financial Stability Oversight Council (FSOC), led by US Treasury Secretary Steven Mnuchin, will meet today to discuss the impact of the coronavirus disease (COVID-19) on market developments.

The FSOC, created in response to the 2008 financial crisis, monitors excessive risks to the American financial system and will summarise the meeting’s conclusions in a public statement.

The spread of the SARS-CoV-19 virus, which causes the COVID-19 disease, has significantly affected the US economy by depressing both supply and demand for goods and services. American financial markets have also suffered: earlier this month, the S&P 500 entered a bear market (a term for when stock prices decline by 20%).

While the FSOC lacks the direct intervention capabilities of the US Federal Reserve or Congress, the goal of today’s meeting is to reduce market volatility by influencing investors’ expectations. Mnuchin is expected to signal the continued operation of financial markets, quelling fears of a shutdown.

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In addition, the FSOC contains the heads of both monetary and fiscal policy, Mnuchin and Federal Reserve Chairman Jerome Powell. If the FSOC can convince concerned investors that the Fed and the Treasury’s actions will encourage short-run stability, market volatility may decrease, a first step to slowing a potential recession.

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