May 7, 2020 - Economy & Business

Putting the world's coronavirus-driven monetary policy into perspective

Dion Rabouin, author of Markets
Reproduced from BofA Global Research; Table: Axios Visuals

"The monetary policy response to COVID-19 has been massive," Bank of America Global Research analysts write in a recent note to clients.

What's happening: Led by the Federal Reserve, which has added $2.5 trillion to its balance sheet in less than two months, all of the world's major central banks have taken extreme policy action.

  • The Bank of Japan has doubled its ETF purchase target limit and increased its purchases of commercial paper and corporate bonds.
  • The Bank of England has restarted quantitative easing and is expected to double its balance sheet holdings by year-end.
  • The Bank of Canada has launched QE for the first time.
  • The Reserve Bank of Australia has joined the BoJ in attempting yield curve control.

The big picture: BofA analysts expect total holdings among the "big six" central banks to increase from 46% of GDP at the end of 2019 to around 78% by the end of 2020.

  • In 2007, the total was just 16% of GDP.

What's next: Inflation and currency risk in the near term are not major worries, BofA argues, as developed markets could actually see their currencies rise in value as more emerging market central banks start their own forays into quantitative easing.

  • "We think the key risks to [developed markets] are 'Japanification' — sustained zero or negative policy rates, very flat yield curves and policy impotence — and distortions from the growing prominence of central banks in various markets."

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

Go deeper

The Fed's balance sheet expansion may be slowing inflation

Data: Federal Reserve Bank of St. Louis; Chart: Axios Visuals

Coins and bills in circulation make up only 10% of the money supply today, Deutsche Bank Securities chief economist Torsten Sløk points out in a note to clients.

What it means: The majority of the money supply is now used by the Fed for its balance sheet and in the banking sector to purchase financial assets.

Updated 18 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 8 p.m. ET: 6,72,447 — Total deaths: 379,709 — Total recoveries — 2,725,541Map.
  2. U.S.: Total confirmed cases as of 8 p.m. ET: 1,831,435 — Total deaths: 106,180 — Total recoveries: 463,868 — Total tested: 17,757,838Map.
  3. 2020: N.C. governor says GOP should plan for a "scaled-down convention."
  4. Public health: Protests against police brutality threaten coronavirus response — Controlling the virus in nursing homes won't be easy.
  5. Business: More than 1 in 6 black workers lost jobs between February and April.
  6. Tech: Zoom revenues and profit soar as pandemic propels videoconferencing.
Updated 11 mins ago - Politics & Policy

Updates: George Floyd protests continue past curfews

Police officers wearing riot gear push back demonstrators outside of the White House on Monday. Photo: Jose Luis Magana/AFP via Getty Images

Protests over the death of George Floyd and other police-related killings of black people continued Tuesday across the U.S. for the eighth consecutive day, prompting a federal response from the National Guard, Immigration and Customs Enforcement and Customs and Border Protection.

The latest: Even with early curfews in New York City and Washington, D.C., protesters are still out en masse. Some protesters in D.C. said they were galvanized by President Trump's photo op in front of St. John's Church on Monday and threat to deploy U.S. troops in the rest of country if violence isn't quelled, NBC News reports.