The world’s top central bankers have opened the taps with trillions of dollars in promised credit to prevent a global pandemic from causing a global economic depression, Reuters informed.
On Tuesday they will update their plans in presentations that could begin to signal just how much more they feel they can do in response to a once-in-a-century economic shock triggered by the spread of the coronavirus.
Despite the efforts made so far, the global economy is not out of the woods given the unique risks posed by the health crisis, and top officials from the Federal Reserve, European Central Bank and Bank of Japan are likely to acknowledge as much when they speak Tuesday at a virtual meeting of the National Association for Business Economics.
“We know monetary policy is pedal to the metal,” Chris Varvares, co-head of U.S. economics for IHS Markit’s Macroeconomic Advisers, said at a NABE panel on the global economy on Monday. But “the disease is the boss…We are really having trouble tamping this down to low levels that will allow the economy to fully recover.”
Powell speaks at 10:40 EDT (1440 GMT), ECB executive board member Philip Lane at 11:30 (1530 GMT), and Bank of Japan Governor Haruhiko Kuroda on Tuesday evening at 7 p.m (2300 GMT).
For all three, their remarks will be framed by separate debates underway among elected leaders in the United States, Europe and Japan over the need for more stimulus.
With interest rates already at zero – and global demand still weak, millions unemployed and private incomes falling – central bankers and economists say the most effective response would be from fiscal authorities able through unemployment insurance or other existing programs to send money directly to households.
“This is a natural role (for fiscal policy)…when there is not enough aggregate demand,” Chicago Federal Reserve President Charles Evans said in remarks Monday.
Even the more optimistic forecasts see the global economy shrinking by perhaps 4% this year.
Still, all three major central banks face decisions in coming weeks over their next crisis-fighting steps, generally around whether and how to expand the amounts and types of assets they are buying each month.