Next steps to address impact of coronavirus
GLOBAL central bankers enter a new week under fresh pressure to outline the next steps in their battle to address the impact of the coronavirus outbreak.
Policymakers got a wake-up call last week as the Federal Reserve’s emergency interest rate cut did little to restore confidence, leaving officials hunting for innovative ways to add stimulus that can have a more targeted effect on the disruption caused by the virus.
The first institution to have to grapple with that conundrum this week is the European Central Bank, which meets on Thursday. While Christine Lagarde has less room to act than the Fed, investors nonetheless see a good chance of a rate cut, while economists are eyeing up ways the institution could adopt to funnel money into the economy.
“The Fed’s attempt at calming markets didn’t have the desired effect, meaning central banks need to weigh their limited options carefully,” according to Bloomberg Economics’ Jamie Rush.
“The ECB’s problem is that inaction would tighten financial conditions,” said Rush, who predicts policy makers in Frankfurt will reduce the deposit rate by 10 basis points and launch a new targeted refinancing operation.
Elsewhere, investors will be on the look-out for clues for how global central banks and governments will fine tune their actions. The UK government will unveil its response at Wednesday’s budget, with a package of fiscal measures that could be supplemented by Bank of England support.
The world economy this week:
Asia: China’s economic data this week will provide a glimpse of how badly the virus has hurt the real economy. Chinese numbers published on Saturday showed exports fell more than expected in the first two months of this year and inflation data due tomorrow will offer more insight on supply disruptions, while Taiwan’s trade figures today will show the impact on supply chains.
Japan releases revised estimates for GDP today and central bank officials in Australia and New Zealand will give speeches outlining what the virus outbreak means for monetary policy. India publishes inflation data later in the week.
Europe: The UK is set to deliver its first response to the economic threat posed by the outbreak on Wednesday when Chancellor of the Exchequer Rishi Sunak outlines the budget. | Bloomberg
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