It is one thing to be the epi-centre of a virus that causes acute disruption to global supply chains. It is quite another to then be responsible for a pandemic that causes schools and businesses to be closed down across the entire world. China’s reputation for ‘competency’ will take a long time to recover.
It is worth emphasising, amidst the panic, that more than 70 drugs are currently being trialled worldwide. It may become a global pandemic, but the medical/pharmaceutical response has been global too. Doctors in China are prioritising drugs they can get hold of, and these include several medications already approved for treating HIV.
In the US, the drop in mortgage rates through 2019 was enough to push delinquency rates to new historic lows. The rally in Treasuries witnessed this year will be a big cushion: this is a medical crisis demanding a government response, and Congress seems ready to step up to the plate.
If ever there was a ‘crisis’ that central banks had to sit out, to prove that government officials have the appropriate policy tools, it must surely be Covid-19. Cutting rates would be overreaction.
• Talk of global decoupling premature
• 70 drugs being trialled worldwide
• Rate cuts not the answer
To download the PDF of the commentary, click here
