Central bankers scramble for answers to virus fallout

Bloomberg

Global central bankers enter a new week under fresh pressure to outline the next steps in their battle to address the impact of the coronavirus outbreak.
Policy makers got a wakeup call last week as the Federal Reserve’s emergency interest rate cut did little restore confidence, leaving officials hunting for innovative ways to add stimulus that can have a more targeted effect on the disruption caused by the virus.
The first institution to have grapple with that conundrum is the European Central Bank (ECB). While Christine Lagarde has less room to act than the Fed, investors nonetheless see a good chance of a rate cut, while economists are eyeing up ways the institution could adopt to funnel money into the economy.
“The Fed’s attempt at calming markets didn’t have desired effect, meaning central banks need to weigh their limited options carefully,” according to Bloomberg Economics’ Jamie Rush.
Elsewhere, investors will be on the lookout for clues for how global central banks and governments will fine tune their actions. The UK government will unveil its response at Wednesday’s budget, with a package of fiscal measures that could be supplemented by Bank of England support.
China’s economic data will provide a glimpse of how badly the virus has hurt the real economy. Chinese numbers showed exports fell more than expected in the first two months of this year and inflation data due on Tuesday will offer more insight on supply disruptions, while Taiwan’s trade figures on Monday will show the impact on supply chains.
Japan releases revised estimates for GDP and central bank officials in Australia and New Zealand will gives speeches outlining what the virus outbreak means for monetary policy. India publishes inflation data later in the week, which will guide calls for a possible interest rate cut in coming months.
The UK is set to deliver its first response to economic threat posed by outbreak on Wednesday when Chancellor of Exchequer Rishi Sunak outlines the budget. Investors expect Bank of England to follow with an interest-rate cut later this month.
Ukraine’s central bank is set to cut interest rates, while Serbia is likely to pause for a fourth meeting. Mauritius’s central bank also holds its monetary policy committee meeting, its first after its top management was changed and a governor was appointed.
On the data front, euro-area industrial production numbers will show the state of play in January just before China became engulfed by the virus outbreak that has since spread across the globe.
And in South Africa, a quarterly business confidence index will probably show sentiment in the economy has deteriorated even further in the first three months of the year.
On Monday, data in Mexico will show inflation last month accelerated further above target, raising the odds that policy makers will keep their key rate unchanged at their March 26 meeting.

The Federal Reserve is in blackout next week with no scheduled speeches just as investor fears over spreading coronavirus intensify bets that the central bank will cut rates again at its meeting March 17-18. Traders will also be watching for next week’s economic data including job claims, trade and consumer sentiment data to gauge the impact of the health crisis on the economy.
Latin America
On Monday, data in Mexico will likely show inflation last month accelerated further above target, raising the odds that policy makers will keep their key rate unchanged at their March 26 meeting.
In Brazil, Wednesday’s consumer price report should show inflation in February slowed below the year-end target of 4%. The report takes on added significance after policy makers last week said the coronavirus outbreak poses a bigger risk of stalling the economy than reigniting inflation, suggesting they won’t end Brazil’s record easing cycle when they meet next week. Peru’s central bank will probably cut rates when it meets on Thursday.