These factors meant that monetary policy alone – lowering the policy rate to reduce carry trade – could not have prevented the appreciation of the nominal and real exchange rates. To prevent the real appreciation would have required macroeconomic policy tightening to rein in domestic expenditure and moderate inflation.
Current Economic Situation and Outlook In February 2020, none of us could have imagined that in a few short weeks the COVID-19 pandemic and the mitigation efforts put in place to contain it would deliver the most severe blow to the U.S. economy since the Great Depression.