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Global Central Banks response to the Corona Crisis

Updated: Jul 31, 2020

Global central banks pull out all stops as coronavirus paralyzes economies.

The U.S. Federal Reserve and its global counterparts moved aggressively with sweeping emergency rate cuts and offers of cheap dollars to help combat the coronavirus pandemic that has jolted markets and paralyzed large parts of the world economy.

The Federal Reserve has cut down the federal funds rate to zero and also eliminated the bank's reserve requirements. It also lowered the discount rate from 1.75% to 0.25 %. It also said it would buy at least $500 billion in treasury securities and $200 billion in mortgage-backed securities

As the country goes on a self-imposed lockdown to fight the coronavirus contagion, a crack team of 150 people, in hazmat suits, is keeping India’s financial system up and running since March 19 from an unknown location in a completely quarantined environment. 1 lakh crores are to be invested in Long term Repo Operations(LTRO), to improve dollar liquidity. The RBI will try to push more liquidity in the market and ease repayment issues to sectors that have been disrupted. In a press release dated March 16, the RBI has also advised all banks in the country to devise a strategy and a mechanism to monitor the spread of the coronavirus within their respective organizations.

The European Central Bank can’t stop the euro-area from sliding into recession but it may be able to prevent another devastating debt crisis that threatens the bloc’s survival.

ECB launched a new PEPP of €750bn package to halt the march of the Coronavirus. To keep the liquidity flowing, it adopted Quantitative Easing (QE) by massively buying up government and corporate debt. Greek securities being included in the PEPP was a cherry on the QE cake. Thus, a positive response was witnessed.


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