By CentralBankNews.info
From the South Pacific to the North Atlantic central banks are slashing interests rates to ease the devastating blow to economic activity from the spread of the coronavirus and injecting trillions of dollars of liquidity to ensure the financial system continues to operate smoothly.
This week alone, 38 central banks – from the United States to Fiji and Iceland – have cut their rates, boosting the number of rate cuts so far in the month of March to 60.
Since the outbreak of the coronavirus, or Covid-19, in China first began to affect financial markets in late January, policy rates have been cut an astounding 79 times, with many central banks cutting rates multiple times in response to the growing threat of a global recession.
Illustrating the speed with which the threat to economic growth has mushroomed, 40 of those rate cuts have been taken at multiple extraordinary policy meetings, such as the U.S. Federal Reserve, the Bank of Canada, the Bank of England and the Reserve Bank of Australia.
On Friday March 20, for example, the central banks of Thailand, Namibia, Romania and Mexico cut rates at emergency policy meetings.
From the beginning of this year, 55 different central banks have cut policy rates 85 times by a cumulative 6,453 basis points, or a net reduction of 6,013 points when taking into account the four rate hikes seen this year from Kazakhstan, the Czech Republic, the Kyrgyz Republic and Denmark.
Including other measures taken to ease monetary policy in addition to rate cuts – such as cutting lowering reserve requirements, countercyclical capital buffers, injecting large-scale liquidity, launching new low-cost loan programs or restarting asset purchases – there have been at least 139 steps to ease monetary policy.
The global monetary policy rate (GMPR), the average interest rate by 97 central banks worldwide, has plunged 63 basis points this year to 5.06 percent from 5.69 percent at the end of 2019, 6.42 percent at end-2018 and 5.99 percent at end-2017.
The damaging effect on the global economy from the virus began to slowly emerge and then accelerate after Jan. 23, when China’s government imposed the “Wuhan Lockdown” on the industrial hub and city of 11 million people to contain the spread.
Illustrating just how interwoven the global economy has become, Sri Lanka’s central bank was the first central bank to refer to the coronavirus when it lowered its rate on Jan. 29, days before China’s central bank on Feb. 3 began to pump in liquidity to the banking system at lower interest rates.
Thailand’s central bank then followed suit by cutting its rate on Feb. 5 and since then the rate cuts have been fast and furiously, spanning the globe from Mongolia to Mauritius.
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