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Illustration: Aïda Amer/Axios

Having unloaded a historic arsenal of stimulus measures over the past three months, the world's central banks are doubling and tripling down on bond buying and policy easing even as the stock market booms and unemployment improves.

Why it matters: Many have credited the unprecedented surge of liquidity for the exceptionally fast rebound in capital markets — but with millions of workers and small business owners unable to take direct advantage of such programs, more action could further exacerbate the chasm between financial assets and the real economy.

What’s happening: The Fed is meeting today. It has yet to fire up many of its newly created lending and bond-buying programs, which are budgeted for hundreds of billions of dollars each and to which it has widely expanded access.

  • Analysts at Goldman Sachs and other major investment banks also expect it to announce a yield curve control program in the coming months that would see the Fed buying as many U.S. government bonds as necessary to keep Treasury yields at its desired level.

The state of play: "[Fed chair] Jay Powell has said he will expand the balance sheet to infinity if need be,” DoubleLine CEO Jeffrey Gundlach said during a webcast on Tuesday, predicting the Fed would institute the policy if yields continue to rise.

Elsewhere, the People's Bank of China continues its reverse repo program to provide capital to banks and announced in late May it will introduce 11 financial reforms, including more incentives for commercial banks to provide financing to smaller businesses.

  • The European Central Bank has increased its bond buying program to about 1.1 trillion euros and last week expanded its Pandemic Emergency Purchase Program (PEPP) to 1.35 trillion euros, extending it through at least June 2021.
  • The Bank of Japan has increased its purchases of ETFs and other risky assets, including corporate bonds, and is creating a new program to extend zero-rate loans to financial institutions.
  • Central banks in Indonesia, Poland, Romania and South Africa are among those in emerging markets that have started to buy government debt and initiate quantitative easing programs.

The big picture: In total, the world's four largest central banks — the Fed, ECB, BOJ and PBOC — hold $23.3 trillion on their balance sheets, according to data from Haver Analytics and Yardeni Research.

  • When including major central banks from England, Australia and Canada, that number rises to around $25 trillion, data from Bank of America show.

Of note: Fiscal policy also is expected to ramp up this year, even after measures in the past three months that Fitch Ratings estimates totaled 7% of global GDP, or around twice the total expended during the global financial crisis.

Go deeper: Central banks load up for a long war against coronavirus

Go deeper

Fed upgrades expectations for pandemic-hit economy

Jerome Powell testifies before Congress in June. (Photo: Tasos Katopodis/Pool/ AFP via Getty Images)

The Federal Reserve said Wednesday that the economy will shrink by 3.7% this year — a rosier outlook than the 6.5% contraction initially projected in June.

Why it matters: The economy is still wrecked by the coronavirus pandemic, but has rebounded faster than some anticipated. Signs still suggest the recovery could stall out. The August unemployment rate is already lower than where the Fed, in June, said it would be by year-end.

Updated Oct 7, 2020 - Health

World coronavirus updates

Expand chart
Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

New Zealand now has active no coronavirus cases in the community after the final six people linked to the Auckland cluster recovered, the country's Health Ministry confirmed in an email Wednesday.

The big picture: The country's second outbreak won't officially be declared closed until there have been "no new cases for two incubation periods," the ministry said. Auckland will join the rest of NZ in enjoying no domestic restrictions from late Wednesday, Prime Minister Jacinda Ardern said, declaring that NZ had "beat the virus again."

Updated 13 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: Large coronavirus outbreaks leading to high death rates — Coronavirus cases are at an all-time high ahead of Election Day — U.S. tops 88,000 COVID-19 cases, setting new single-day record.
  2. Politics: States beg for Warp Speed billions.
  3. World: Taiwan reaches a record 200 days with no local coronavirus cases.
  4. 🎧Podcast: The vaccine race turns toward nationalism.

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