Issue link: http://palletcentral.uberflip.com/i/1266845
14 PalletCentral • May-June 2020 palletcentral.com A Few Bright Spots Amid the Gloom First, inflation is no longer a policy concern. Cuts in wages and falling energy prices have some analysts concerned about deflation, not inflation. Thus the Federal Reserve will be focused on supporting the economy and the financial system. Interest rates will remain near zero for the rest of this year, even with the surge in the governments' financing needs. Second, the underlying demand for housing remains strong. Housing activity finally got up to might make it unprofitable for the business to reopen or survive. Next, it is hard to predict if the rate at which the virus spreads will be manageable. This depends on people's behavior and business activities to insure hygiene – which is unpredictable at best and chaotic at its worst. Then, there is a risk that restrictions will be imposed again this fall. Finally, it is hard to predict how the consumer is going to behave even after restrictions are removed. Will they go out to eat dinner or get on an airplane? How will these businesses adjust to much lower demand levels – cut capacity further or raise prices (airlines for instance)? Lagging the recent sharp drop in activity is a series of second order affects as well. Revenue declines for state and local governments will force budget cuts in the second half of the year. Will banks toughen lending standards given the rise in payment defaults on business loans and mortgages? Interest rates will remain near zero for the rest of this year, even with the surge in the governments' financing needs.