Money Minute Monday 23 March: will “whatever it takes” be enough?

As we start to see the damage that the shutdown is doing, Money Minute looks at central bank measures to counter it.

Good morning and welcome to Money Minute, your comprehensive preview of this week’s biggest financial stories. Last week was yet another historic week for markets – we seem to be having a lot of those lately.

The Bank of England cut interest rates yet again, this time to a record low of 0.1%. More importantly it significantly increased its quantitative easing scheme – printing money to buy government debt and thus keep long-term interest rates down.

The European Central Bank also boosted its own bond-buying programme, and in the US, the Federal Reserve slashed interest rates to 0%.

Perhaps more importantly, around the world, governments laid out plans to do “whatever it takes” to keep economies ticking over while the coronavirus shuts down activity across the world. Will these moves be enough?

We are starting to see the damage that the shutdown has already done. US weekly jobless claims rocketed last week and this is only the beginning. We can expect far more layoffs in the weeks and months to come.

The key to avoiding a depression rather than a deep recession arguably lies with preventing job losses where possible, providing a generous cushion for people who do lose their jobs, and making sure that the layoffs are temporary.

That’s a far more complicated and politically fraught task than propping the banks up was in 2008. So expect to see a lot of policy twists and turns in the coming weeks.

As for economic data – the UK will see the latest house price and inflation data, but those figures are likely to be of limited value this week. Of more interest will be German consumer sentiment, which will register the full impact of coronavirus fears.

And of course, keep an eye on coronavirus infection data – markets have already priced in a drastic recession but even as Britain goes into hibernation, concerns about the potential for a second wave are likely to creep up the radar.

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