G7 promises to use “all the right tools” to fight the virus, but without specifics

The Ministers of Finance and the heads of the central banks of the G7 countries confirmed their readiness to take all possible measures to protect the world economy from the influence of the coronavirus, but refrained from mentioning specific steps that would help offset the damage from the epidemic.

However, the G7 statement failed to shake markets’ confidence in the upcoming easing of policies by leading central banks — the Fed’s key rate cut of 50 basis points at the March 18 meeting and the ECB’s key rate of 10 basis points were still taken into account by the markets.

The following are analyst comments:

Antoine Bouvet, ing

“It was met with disappointment in the markets. The statement coincided with expectations: they said they would monitor the situation without giving any specifics. ”

“We need to look at the reaction in each country separately, since it will vary. We expect a decrease of 50 basis points from the US Federal Reserve, and nothing from the ECB in March.”

Stephen Gallo, BMO Group

“Given the nature of these crises and the fact that this is a supply crisis, central banks can do little. Monetary policy is relatively ineffective when people are bedridden by the virus. Coordinating politics is difficult even when you don’t have a situation fragmented globally. Different countries have different opportunities to respond to the crisis in the financial markets.”

Scott Brown, Raymond James

“Yesterday there was a lot of news that people are looking forward to a meeting of finance ministers and G7 central bankers who will do something. I don’t think they can do much.”

“You can see some kind of rate reduction in the USA, but in other countries of the world the rates are already quite low. There is not much space for budget policy, but these expectations fueled optimism yesterday.”

Samir Goel, Deutsche Bank

“These are not economic shocks, these are shocks caused by the non-economic factor. It’s still not clear how big the problem is or it can be, and until you understand it, it’s hard to decide which medicine to take.”

Daisuke Ono, Sumitomo Mitsui Bank Corp

“You cannot give what you do not have. This is more or less true for each of the G7 countries. The euro zone and Japan already live with negative interest rates, which limits the potential for monetary easing, even if they want to resort to it. As for budget incentives, they may have some effect after the epidemic ends, but they cannot force people to go and spend.”

Selena Ling, OCBC

“G7 applications have definitely lost most of their weight in recent years, it’s just a salad of what they want to do and what they hope to do.”

“I don’t think that (words) are enough to return all that was lost.”