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Epidemics

Central Banks on High Alert as Economies Struggle to Bounce Back

Strategic Insights

— 1 min read

As the world continues to grapple with the economic impact of the COVID-19 pandemic, central banks in the US, UK, and Australia are gearing up for critical policy meetings that could shape the future of their economies. The Federal Reserve, the Bank of England, and the Reserve Bank of Australia are all expected to take action to stimulate growth and prevent further recession.

Key Takeaways:

  • The Federal Reserve is expected to hold off on making big policy adjustments, awaiting the outcome of the US presidential election and any potential implications for the economy.
  • The Bank of England is likely to announce further bond purchases, with analysts predicting an additional £100 billion of purchases, on top of the £300 billion already announced since March.
  • The Reserve Bank of Australia is expected to cut interest rates and launch another round of quantitative easing, despite the country's first recession in almost 30 years potentially being over.
  • Investors are bracing for market volatility in the event of disputed US election results, with some strategists predicting a Biden presidency would pave the way for a more generous fiscal stimulus package.
  • The threat of economic downturn due to the pandemic is severe enough to force a unanimous vote for additional monetary policy measures in some central banks.
  • Analysts predict the RBA will cut the cash rate from 0.25% to 0.10% and expand its bond-buying programme to target the longer part of the yield curve.

Statistics:

  • £300 billion: the amount of bond purchases already announced by the Bank of England since March.
  • PS100 billion: the additional amount of bond purchases predicted by analysts, in addition to the £300 billion already announced.
  • 6.9%: the current unemployment rate in Australia, predicted to rise to 8% by year's end.
  • 2-3%: the inflation target range set by the Reserve Bank of Australia, with inflation remaining below the bottom end for more than four years.
  • 0.26%: the current 10-year gilt yield in the UK, not far above its all-time low.

Sources:

  • "FT REPORTERS"
  • FT reporters (no date mentioned)
  • Elizabeth Martins, HSBC (no date mentioned)
  • Ruth Gregory, Capital Economics (no date mentioned)
  • Guy Debelle, Deputy Governor of the Reserve Bank of Australia (no date mentioned)
  • Saul Eslake, economist and fellow at Tasmania University (no date mentioned)
  • Jamie Smyth (no date mentioned)
  • Bloomberg (no date mentioned)

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