- Other major central banks have announced that they will provide low-cost dollar liquidity to ease credit markets and banks.
- "Reliable access to the liquidity of the US dollar is essential for many banks and companies, including the Euro zone."
- The Central Bank of Japan (BOJ) took steps to relax the monetary policy by increasing the purchases of traded funds and similar risky assets.
Central banks of the major countries of the world took a joint step to compensate for the effects of the coronavirus epidemic on the global economy. The Fed, the US central bank, announced that it would buy at least $700 billion in bonds while reducing interest rates to almost zero on Sunday.
Other major central banks have announced that they will provide low-cost dollar liquidity to ease credit markets and banks. Fed Chairman Jerome Powell stated that the coronavirus outbreak had a “deep” impact on the US and worldwide economies. Powell made this remarks at a press conference following the extraordinary decisions taken before the monetary policy meeting expected this week.
“Economic policy experts must do what we can to ease hardship caused by the disruption to the economy,” Powell said Sunday evening. “We are prepared to use our full range of tools to support the flow of credit to households and businesses.”
The Fed announced that it would cut its policy rate to 0-0.25 percent, and will receive at least $ 700 billion of Treasury and mortgage-backed bonds in the coming weeks. Following the Fed’s decision, New Zealand also took a step to relax in its monetary policy, lowering interest rates. The Australian Central Bank also announced that it will provide additional liquidity to the financial system.
Common Step from Central Banks
Powell noted that central banks are acting in coordination with the European Central Bank, the Central Bank of England, the Central Bank of Japan (BOJ), the Canadian Central Bank and the Swiss Central Bank to counter pressure in dollar liquidity.
German Central Bank President Jens Weidmann evaluated the coordinated step of the central banks positively, and said “reliable access to the liquidity of the US dollar is essential for many banks and companies, including the Euro zone.” He noted that the steps taken by the central banks take responsibility.
Relaxation Step from the Central Bank of Japan
The Central Bank of Japan (BOJ) took steps to relax the monetary policy by increasing the purchases of traded funds and similar risky assets to combat the impact of the coronavirus outbreak on the economy. BOJ did not change short and long term interest rates.
All five central banks have announced that they will provide low-cost dollar liquidity to ease banks and credit markets. Incidentally, this Monday, Andrew Bailey takes the reins of the Bank of England to replace Mark Carney.
Export-oriented economies, such as Germany, are expected to be negatively affected, as the coronavirus epidemic, which has accelerated in Europe and the USA, has disrupted the global supply chain. On the other hand, measures such as travel barriers and the closure of businesses also weaken economies.
Over USD / EU 0.89
Despite the fact that the USD / EU, US Federal Reserve (Fed) has reduced interest rates to almost zero, concerns about the effects of the coronavirus on the global economy have been trading above 0.89, which is the highest in trading day level.