Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a House Financial Services Committee hearing in Washington, D.C., on Tuesday, Feb. 11, 2020. Andrew Harrer | Bloomberg | Getty Images

With the yield on the benchmark U.S. 10-year Treasury note falling half a percentage point in the last month, the markets have given themselves a huge investment return and much cheaper credit costs. The Federal Reserve has been cooperating, too. From September through the end of February, the Fed has injected $236.1 billion of fresh liquidity. That has helped to keep an extraordinarily liquid interbank market, with excess reserves (i.e., the money banks can readily lend) rising, over the same period, by $192 billion to an astounding total of $1.5 trillion. Are the banks lending? Yes, big time: their consumer loans in the year to the fourth quarter were growing at an annual rate of 6%. Should the Fed be flooding the market with more liquidity? The answer is no. In my view, the Fed should now focus on a vigilant oversight of the banking system it supervises and regulates. The European Central Bank and the Bank of Japan need no prodding to speed up the liquidity deluge of the euro and yen markets. They are doing that already. China's central bank has also been easing credit conditions to help its epidemic-stricken economy.

A more general point here is that central banks should not be the first line of defense to a medical emergency. That is primarily an issue for public health authorities. Depending on the nature and scope of the crisis, their intervention may require larger public outlays and a reordering of national priorities. Beyond that, central banks should step in only if the health care problem threatened to depress economic activity to the point of causing a price deflation. At the moment, the U.S. is very far from that. Europe, however, is a different case. The rapidly spreading viral epidemic looks like a coup de grâce to an already stagnating European economy. But sadly, there is no coordinated action of EU member states to face this serious public health emergency. Italy seems left alone to struggle with rising cases of deaths and infections. France is getting ready to set up its own defenses, while Germany, distracted by leadership fights within a moribund governing coalition, triumphantly declares that the viral infection is "under control." The World Health Organization is probably reassured to hear that there was at least one of its major member countries to which its "very high" risk assessment does not apply.