Financial Economics & Central Banking
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The rapid outbreak of the new coronavirus (COVID-19), which has spread far beyond China, has wreaked havoc on financial markets. World stock markets have fallen by around 30% in just over a month, led by the transport, tourism, hotel industry and energy sectors, which has been followed by others such as finance.
The outbreak of Covid-19 will have a significant negative impact on economies at a global level with generalized shocks on supply and demand, therefore, we revised our GDP growth forecast to -4.5%. Fiscal objectives have to take second place; the most urgent is to underpin health systems and support workers.
Last Thursday, a day of panic across markets with plummeting stock markets and investors seeking refuge in low-risk assets, and after the World Health Organization had declared COVID-19 a global pandemic, the ECB strengthened its efforts in terms of monetary stimulus in two ways.
The ECB announced a comprehensive package focused on new liquidity and additional asset purchases measures to support households and firms facing increasing uncertainty.
In an unscheduled and abbreviated statement, the Fed announced an emergency 50bp cut to 1-1.25% in the Fed Funds rate, similar to the response to 9/11.
This Agenda presents the diffusion calendar for 2020 of economic indicators and relevant monetary policy events of Mexico and the United States; dates of important events such as the meetings of various relevant international entities such as: World Economic Forum, World Bank and International Monetary Fund.
The monetary policy rate has plenty of room to decline without affecting inflation or the MXN. The rate cut cycle should continue without a pause at least until the monetary policy stance is not restrictive.