Clearly, last week’s sharp market sell-off in light of coronavirus-related anxiety and the resulting tightening in financial conditions encouraged the Fed to take pre-emptive action to reassure the market - this is a strong signal from the policymakers and a smart move to go early on an already expected cut. Nonetheless, the Fed may have to ease policy further in the weeks to come and appears ready to do so.

As the spread of the coronavirus continues and the chances of containment become slimmer, the impact on the global economy is likely to be sizeable. But while easier monetary policy helps sentiment, central banks should be not acting in isolation; governments should step in with fiscal measures that are timely and well designed, supporting the economies that struggle not just because of the virus itself but also because of preventative measures that - in some cases - have ground economic activity to a halt.

Following the meeting of G7 finance ministers and the Reserve Bank of Australia and Fed moves today, it is now likely that other major central banks such as the Royal Bank of Canada and the Bank of England will follow suit in a coordinated fashion. 

Anna Stupnytska

Anna Stupnytska

Global Macro Economist

Tim Foster

Tim Foster

Portfolio Manager