Global central banks hint at actions to mitigate coronavirus risk

Policymakers at the world's major central banks have successively made emergency statements about appropriate steps targeting potential economic risks caused by the epidemic.

Christine Lagarde, president of the European Central Bank (ECB), said on Monday that the bank is ready to adjust all its instruments. The ECB is the latest to hint at monetary policy actions to cope with the epidemic.

"The coronavirus outbreak is a fast developing situation, which creates risks for the economic outlook and the functioning of financial markets," said Lagarde. "We stand ready to take appropriate and targeted measures, as necessary and commensurate with the underlying risks."

Bank of Japan (BOJ) Governor Haruhiko Kuroda on Monday pledged to take actions to stabilize markets due to the spread of the novel coronavirus.

"The Bank of Japan will closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases," he said in a statement.

Bank of Japan Governor Haruhiko Kuroda speaks at a news conference in Tokyo, Japan, January 21, 2020. /Reuters

Jerome Powell, chair of the Federal Reserve, said in a statement Friday that "the coronavirus poses evolving risks to economic activity," although the U.S. economy remains "strong." Powell said the bank will use tools and act as appropriate to support the economy.

Goldman Sachs on Sunday predicted the Federal Reserve will cut its key interest rate by 50 basis points this month before its mid-March meeting.

Meanwhile, Goldman Sachs also expects the Bank of Canada to cut interest rates by 100 basis points in the near future. Central banks in Britain, Australia, New Zealand, Norway, India and South Korea will cut interest rates by 50 basis points, while the ECB and Swiss National Bank will cut interest rates by 10 basis points.

China's central bank took the earliest action on February 20 by lowering its one-year loan prime rate (LPR) to 4.05 percent and five-year LPR to 4.75 percent to bolster its coronavirus-hit economy and small businesses.

The coronavirus has spread across China and abroad, sending more negative sentiments to stock markets throughout major economies last week. But stocks surged on Monday after positive announcements by central banks, with the S&P 500 gaining by 4.60 percent, Dow surging over 5 percent, Nikkei rising by 1.6 percent and Kospi increasing by 2.4 percent.