Strong Fiscal Response Needed After Fed Moves on Liquidity
Strong Fiscal Response Needed After Fed Moves on Liquidity
Key Insights
- Bold central bank actions have failed to prevent steep declines in equity markets and weakness in credit markets, indicating investor concern that not enough is being done.
- Central banks have moved aggressively to address liquidity issues, but governments need to produce an effective fiscal response.
- For stability to return, there needs to be clear evidence that countries that have taken Draconian measures are succeeding and that others are on the right path.
Aggressive global central bank moves to blunt the financial impact of the coronavirus outbreak have failed to reassure equity and credit markets, putting pressure on governments to come up with a more emphatic fiscal response to the crisis.
While the actions from the U.S. Federal Reserve (Fed) and other central banks were bold, they were not enough to offset the onslaught of bad news surrounding the outbreak, providing further evidence that there is a limit to what central banks can achieve alone. Proof that some countries are succeeding in tackling the coronavirus, providing a clear pathway to those behind the curve, likely will be needed for stability to return to the markets. In the meantime, while negative U.S. policy rates remain unlikely, it is possible that Treasury yields may fall below zero if investor demand for safe‑haven assets remains strong.
Important Information
Where securities is mentioned, the specific securities identified and described are for informational purposes only and do not represent recommendations.
This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.
The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.
Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.
It is not intended for distribution to retail investors in any jurisdiction.
202003-1121712