Corona virus affects the global economy
Corona virus affects the global economy

The major central banks have taken unprecedented incentive measures to support economies in facing the potential damage of the Coronavirus, while injecting massive amounts of liquidity into the financial markets to enhance the capabilities of the financial and economic system to absorb the potential shocks of the global epidemic.

And the most prominent incentive measures at the level of the most important central banks around the world is to reduce interest rates in those banks to levels close to zero. In addition to the interest rate cuts following the scheduled meetings of the major central banks, some of these banks held emergency meetings during which they took decisions to cut interest rates further.

The Fed issued the scene with a stimulus plan and operations launched by the Federal Open Market Committee to support and stimulate the US economy.

The Fed followed the Bank of Canada and the Reserve Bank of Australia, and the Bank of Japan. The Bank of England and the British Ministry of Finance joined the broad-based quantitative easing package with financial stimulus packages and heavy-caliber quantitative easing measures in the week ending March 20.

In a rare weekend meeting, the Federal Reserve decided last Sunday to suddenly cut the interest rate to zero, indicating a straight bending cut to key rates in less than two weeks.

The Central Bank, in a statement issued on this sudden decision, described this reduction as an "urgent move."

The FOMC cut the interest rate from 1.25% to 0.25% on lending and 0.0% on deposits.

"The effects of the Coruna virus will affect economic activity in the near term, which poses a threat to the outlook for the economy," the Fed said.

The Fed pledged "to use the full tools to support the economy in addition to expanding the purchases of US treasury bonds to $ 500 billion and real estate backed purchases to reach $ 200 billion over the next few months," as part of a stimulus package that the central bank had already begun last Friday with the goal of supporting the economy Facing the potential damage from the spread of the Coruna virus, which raises the value of asset purchase programs by $ 700 billion.

In addition to the stimulus efforts by the Central Bank, the US Congress passed last Thursday a $ 8.3 billion Corona Virus Emergency plan for American citizens to cover free tests to detect the Corona virus and additional paid sick holidays and other expenses that raise the burden on American families in light of the spread Corona Virus.

US President Donald Trump and his administration are seeking to pass a $ 1 trillion stimulus package to counter the potential economic damage to the Corona virus.

The Bank of Canada lowered the interest rate by 50 basis points in a sudden move last Friday, bringing the interest rate to 0.75% against the previous rate of 1.25%.

This cut was the second for Canadian interest in the same month after the interest rate cut to 1.25% at the regular meeting of the Central Bank on the fourth of March.

He also announced reducing the capital and liquidity requirements of financial institutions operating in Canada to 1.25% compared to previous levels at 2.50%, stressing that he will not be raised before at least 18 months.

Bill Monroe, the Canadian Minister of Finance, said the government will provide a $ 10 billion credit program.

He added that the program will provide funds for companies to stimulate the economy.

Justin Trudeau, Prime Minister of Canada, revealed last Wednesday the financial stimulus plan for the Canadian economy amounting to 82 billion dollars.

The stimulus efforts of the Bank of Canada and the Canadian government in the face of the potential economic impacts of the Corona virus are estimated at $ 100 billion so far.

The Bank of England cut interest rates last Thursday to 0.1% in efforts to overcome the effects of the Corona virus on the British economy, in an emergency meeting held Thursday.

The Bank of England also announced, in a statement issued after the emergency meeting, the addition of 200 billion pounds to the value of the program of quantitative easing and the purchase of assets in effect before to reach the total value of the program to 645 billion pounds, in order to encourage banks to pass the benefits of the new reduction to companies and families in the UK.

British Minister of Finance Rishi Sonak said last Tuesday that the UK government will provide loans with corporate guarantees of 300 billion pounds.

This brings the total additional stimulus efforts to the Bank of England and the British Ministry of Finance to £ 500 billion.

The Bank of Japan eased monetary policy on Monday by pledging to buy risky assets such as exchange-traded funds at a rate double the current pace, and joining global central banks to combat the widening economic fallout from the Corona virus.

The central bank also decided to create a new loan program to extend interest-free loans for one year to financial institutions in an effort to boost lending to companies affected by the virus outbreak.

"The Japanese central bank will take additional monetary easing steps as needed without hesitation, focusing closely on the impact of the Corona virus epidemic at the present time," the bank said in a statement after an emergency policy meeting. And that the bank will "aggressively" buy ETFs at an annual pace of about 12 trillion yen, equivalent to $ 112.55 billion, which is twice the amount it has pledged to buy so far.

J-REIT purchases will double the frequency of مليار 180 billion annually. In an effort to prevent credit markets from freezing, the bank will allocate 2 trillion yen to purchase additional purchases of commercial paper and corporate bonds.

The Reserve Bank of Australia cut the interest rate by 25 basis points to 0.25% in an emergency meeting of the Monetary Policy Committee as part of its efforts to ease pressure on the Australian economy in the face of concerns about the spread of the epidemic Corona virus.

The central bank also launched a $ 90 billion financing program to boost the credits Australian companies might need.

This comes after an initial response by the Australian Reserve to cut interest at its regular meeting on the third of March from 0.75% to 0.5%.

The government in Australia announced that it may pump about A $ 17.6 billion to the economy in an attempt to stop the impact of the spread of the Corona virus, which may lead to the economy being stagnated, especially due to travel restrictions after the World Health Organization announced that it is a pandemic.

European Central

The European Central was the last of the central banks to be the last to join the stimulus caravan a few days ago after it was widely criticized for fixing monetary conditions, including the interest rate, at its regular meeting held earlier this March.

But the central bank announced last Wednesday to increase the volume of its purchases of assets by 75 billion euros in the form of purchases of public and private sector bonds to support the economy in the face of the potential effects of the Covid 19 epidemic.

This increase came within the framework of an interim bond purchase program launched by the Central Bank in the name of "the emergency asset purchase program to combat the epidemic."