This morning, #markets appeared somewhat unimpressed by the statement from #G7 finance ministers and central bankers, which displayed #solidarity in the face of #coronavirus risk, but it notably lacked specifics.
However, roughly two hours later the first specific policy moves arrived, with the #FOMC issuing a statement announcing the decision to “lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1 1/4 percent,” which initially cheered risk #markets.
Still, as we’ve stated many times in the past, #MonetaryPolicy can be a fairly blunt tool to use when contending with a problem such as #coronavirus and its complex economic influences, so we expect many countries will also need to implement more targeted #fiscal responses too.
And even before the arrival of #coronavirus risk, #G7 countries were witnessing a collective backdrop of moderate #growth and tepid #inflation, which we think is likely to anchor interest rates lower across the curve for some time to come.
A decade into historically low rate policy, and even apart from #coronavirus impact, the risks to #inflation are still to the downside. The fact is that in a highly #leveraged global #economy, keeping rates low and stable is a structural policy prerequisite.
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