Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Global Central Banks Up The Ante On COVID-19 As Uncertainty Reigns

By (Darrell Delamaide/ OverviewNov 10, 2020 11:10
Global Central Banks Up The Ante On COVID-19 As Uncertainty Reigns
By (Darrell Delamaide/   |  Nov 10, 2020 11:10
Saved. See Saved Items.
This article has already been saved in your Saved Items

Central banks around the world are pulling out most—but not all—of the stops to help their local economies soften the impact of the COVID-19 pandemic.

The Bank of England said last week it will increase its purchases of government bonds by £150 billion, £50 billion more than investors had been expecting. This will bring the Bank’s total bond purchases to £895 billion, including £20 billion in corporate bonds.

UK 10Y 300 Minute Chart
UK 10Y 300 Minute Chart

However, the statement from the central bank’s Monetary Policy Committee was markedly tepid regarding negative interest rates.

Noting that the market-implied path for the Bank Rate was hardly changed from August, showing a slight dip below zero, the MPC commented:

“This suggests that market participants attach some weight to the possibility of a negative rate.”

Investors took this to mean that the central bank, and notably chief economist Andy Haldane, don’t share those expectations. However, the Bank has asked institutions to comment on whether they can handle a negative Bank Rate, suggesting it wants to keep the option open. MPC members have been underwhelmed about how helpful the negative rates are where they have been tried.

RBA Cut Rates But BoJ Had No Room To Maneuver

The Reserve Bank of Australia demonstrated somewhat more urgency at the beginning of the week, cutting its official cash interest rate to 0.10% after saying it would not go below 0.25% when the rate was cut to that level in March.

The central bank also announced its first bona fide effort at quantitative easing, saying it will purchase A$100 billion in Australian government bonds and bonds of the states and territories over the next six months on an 80-20 split with maturities of five- to 10-years.

Previously, the RBA had limited its purchases to three-year bonds, targeting the 0.25% rate. The new bond purchases are delimited instead by quantity, to serve the same purpose as they do in many other major economies in providing monetary accommodation.

The combination, RBA governor Philip Lowe said, “will lower the whole structure of interest rates in Australia.” That, in turn, will support the economy through lower borrowing costs, a lower exchange rate, and higher asset prices.

Japan 10Y 300 Minute Chart
Japan 10Y 300 Minute Chart

The Bank of Japan has virtually no room for maneuver, and held its overnight interest rate at -0.1% while maintaining its purchases of 10-year bonds to keep the yield at about zero. The central bank has been losing its battle to lift inflation, and the pandemic’s impact on demand will lead to a 0.7% decline in prices this year, according to the BOJ forecast.

Japan is also seeing an increase in infections. “The economic outlook remains highly uncertain and there are big downside risks,” BOJ Governor Haruhiko Kuroda said after the bank’s policy meeting.

ECB Stands Pat...For Now

The European Central Bank also took no action at its late October policy meeting, hinting that it would be increasing its asset purchases in December and perhaps act on interest rates and bank lending once policymakers “recalibrate” and affirm the bad news that the euro area economy is hurting.

The US Federal Reserve, for its part, was in the awkward position of meeting between the presidential and congressional election on November 3 and the tabulation of results, which were delayed due to the high volume of mail-in votes because of COVID.

The prospect of a Senate remaining under control of the Republicans would mean the massive stimulus envisaged by the Democrats would be much smaller, putting more pressure on the Fed to act in December to adjust its asset-purchase program.

The US, too, is facing a resurgence of COVID infections, but is unlikely to have a national lockdown under the country’s divergent jurisdictions, especially as optimism grows that an effective vaccine is on the way.

Global Central Banks Up The Ante On COVID-19 As Uncertainty Reigns

Related Articles

Global Central Banks Up The Ante On COVID-19 As Uncertainty Reigns

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email