SNAPSHOT2 min read

Janet Mui: weekly economic update 6 March

Investors now fear that the coronavirus will be a significant drag on global growth. Central banks, notably the Fed, have responded with emergency rate cuts. We remain cautiously optimistic.

06/03/2020
Bank-of-England-London

Authors

Janet Mui
Global Economist, Cazenove Capital
  • Investors are increasingly fearful that the coronavirus will significantly depress global economic growth. 
  • We have seen a co-ordinated central bank response to the crisis. The Fed, the Reserve Bank of Australia and the Bank of Canada have all cut rates. The BoE, ECB and BoJ have all signalled they are ready to provide support, though they have less room to cut rates.  
  • The Fed's 50bp cut takes the US policy rate to a range of 1.0 - 1.25%. This was the Fed's first "emergency" rate cut since the financial crisis. Markets expect further easing. 
  • Governments are also considering fiscal stimulus measures. Italy, for instance, is weighing up a 6 billion euro support package for its economy. 
  • Markets remain cautious. It is still far from certain that the virus can be contained. Investors also have concerns about the effectiveness of a monetary response to a public health crisis.
  • We remain cautiously optimistic. Prior to the crisis, global economic momentum was improving. We think the coronavirus will delay, rather than derail, this recovery.
  • Global economic growth will be lower in the first half of the year. However, we expect activity to pick up in the second half, supported by a robust response from central banks and increased government spending .

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Authors

Janet Mui
Global Economist, Cazenove Capital

Topics

Snapshot
China
UK
Economic & Strategy Viewpoint

Cazenove Capital is a trading name of Schroders (C.I.) Ltd which is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 2020 and the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended in the conduct of banking and investment business. Registered address at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3UF, (No.24546) . Schroders (C.I.) Limited, Jersey Branch is regulated by the Jersey Financial Services Commission in the conduct of investment business. Registered address at 40 Esplanade, St. Helier, Jersey JE2 3QB, (No.31076).

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