As we continue to monitor developments with respect to the spread of the Coronavirus, government responses, and implications for economic growth and the markets, we thought it would be important to share specific details of actions being taken by central banks and governments around the world.
“For every action there is an equal and opposite reaction” – Isaac Newton’s 3rd Law of motion.
There is no doubt that the Coronavirus has created massive ripples across the globe affecting all aspects of life. As we live through these tough moments, we can be reassured that this event has prompted equally massive monetary and fiscal responses globally by governments and central banks.
Central Banks and governments have taken aggressive steps to stimulate the economy and ensure the liquidity of the financial systems. To name a few, the U.S. Central Bank (The Fed), Bank of Canada, the European Central Bank and the Bank of England have already aggressively cut interest rates. On top of this, many central banks around the globe have massively increased their asset purchase programs to provide as much liquidity to the system as possible. We are starting to see the reintroduction of many of the programs that were last seen during the depths of the financial crisis.
“The place we can add the most value is making markets function.” - Federal Reserve Bank of Richmond president Thomas Barkin
To learn more about the specific roles that Central Banks play during periods of large volatility to ensure the stability of the financial system, I invite you to read this recent RBC Wealth Management article by clicking on the following link: Central bank policies are in a race with coronavirus
“investors can take some solace in the fact that the Fed not only has the tools but also the prior experience of using them to facilitate market functioning, and rapidly so.” – RBC Wealth Management’s “Central bank policies are in a race with coronavirus”
History has shown us that central bank stimulus is more effective when deployed hand-in-hand along with fiscal government policies. The combination of central banking monetary stimulus along with government fiscal stimulus can be a powerful tool for combating periods of intense uncertainty and economic dislocations.
“Fiscal policies can come in many guises including: state guaranteed loans to corporations; company bailouts; cash handouts to households; sick pay (or more generous statutory sick pay); government subsidies for underutilized workers; tax deferrals/rebates; and mortgage and rent deferrals/rebates.” - RBC Wealth Management’s “Fiscal stimulus joins the fight against coronavirus”
Please click on the following link to learn more about what governments around the world are doing and what specific tools are being implemented to soften the blow: Fiscal stimulus joins the fight against coronavirus
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