G7 Economic Chiefs Hold Emergency Meeting Over COVID-19 Growth Slowdown Concerns... Rising Expectations for Interest Rate Cuts

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The economic leaders of the Group of Seven (G7) have stepped in directly to prevent the global economic damage caused by the spread of the novel coronavirus infection (COVID-19). Through an emergency meeting, they are expected to gather opinions for a joint response and consider measures such as lowering benchmark interest rates.

According to CNBC and other sources on the 2nd (local time), Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), which is the G7 chair country this year, and Steven Mnuchin, Secretary of the Treasury, will hold an emergency conference call on the 3rd to discuss COVID-19 response measures with central bank governors and finance ministers of the G7. Citing sources, CNBC reported that the meeting will involve coordination of fiscal and economic responses to COVID-19. After the meeting, a statement is expected to be adopted expressing cooperation to minimize the economic damage caused by COVID-19.

Central bank governors have already intervened by stating they will take necessary actions as markets plunged sharply due to the global spread of COVID-19. Christine Lagarde, President of the European Central Bank (ECB), said in a statement that she is "ready to take appropriate and targeted measures" against the economic damage caused by COVID-19. She emphasized, "The spread of COVID-19 is a rapidly evolving issue that creates risks to economic outlook and the functioning of financial markets," adding, "The ECB is closely monitoring the situation."

Among the central bank governors, Jerome Powell of the Fed showed swift action. On the 28th of last month, he strongly hinted at a rate cut through an unusual emergency statement, saying, "We will act appropriately to support the economy." Haruhiko Kuroda, Governor of the Bank of Japan, also issued a special statement, saying, "Recently, due to the spread of COVID-19 infections in domestic and international financial and capital markets, uncertainty about the economy has increased, causing continued unstable movements." He added, "The Bank of Japan will monitor future trends and strive to ensure smooth funding supply and financial market stability through appropriate financial market adjustments." Following verbal interventions by central bank heads, the U.S. and Japanese stock markets have rebounded rapidly.

The International Monetary Fund (IMF) and the World Bank (WB) also announced on the same day their intention to provide emergency loans to support COVID-19 responses. Kristalina Georgieva, IMF Managing Director, and David Malpass, WB President, said in a joint statement, "We are ready to assist member countries in responding to the human and economic challenges caused by COVID-19." They continued, "We are paying special attention to low-income countries with vulnerable health systems," emphasizing, "We will make full use of available tools including emergency financial support, policy advice, and technical assistance."