G-7 Major Economies Pledge Cooperation to Deal with Virus

Seven major economies agreed to use "all appropriate tools" to cope with the spreading coronavirus but no immediate actions were declared.

The community of major industrial countries, referred to as the G-7, said Tuesday that it was "ready to take action, including, where necessary, fiscal initiatives, to assist in the response to the virus and to support the economy."

The joint statement from the United States, Japan, Germany, Britain, France, Italy, and Canada was released following a request for an emergency conference of finance ministers and presidents of central banks, headed by the United States. Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin.

The G-7 has issued similar statements during periods of market turmoil, such as the Sept. 11, 2001, terrorist attacks and the 2008 financial crisis.

"Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to using all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks," the G-7 said.

Markets have been looking for a strong immediate response that would include coordinated rate cuts by central banks. U.S. markets, which had been gyrating, went negative after the statement was issued.

Investors are looking for the Fed to cut rates by their next meeting on March 17-18 and possibly before that meeting.

Markets have been looking for a strong response that would include coordinated rate cuts by central banks. U.S. markets, which had been gyrating Tuesday, went negative briefly.

On Monday, the Organization for Economic Cooperation and Development said that the spreading new virus could make the world economy shrink this quarter for the first time since the international financial crisis more than a decade ago.

In a special report on the effects of the epidemic, the global organization said the global economy is still expected to grow this year as a whole and start rebounding next year.

But the OECD reduced its global growth projections by half a percentage point in 2020 to 2.4 percent— and said that if the epidemic lasts long and spreads globally, the number could go as small as 1.5 per cent.

Analysts believe the virus which has now spread to 60 countries including the United States will lower U.S. growth. Economists at Capital Economics said Tuesday it was lowering its U.S. GDP forecast to 1.8% this year, down from a previous 2% with an expectation that the Fed will cut rates by one-half percentage-point by mid-year.

In an attempt to ease markets that had become volatile as the virus spread, Powell issued a statement Friday stating that the Fed would "use our resources" to support the economy, a powerful signal that the central bank was prepared to restore interest rate cuts if the virus affected the US economy.

President Donald Trump, a frequent critic of the Fed chairman that he appointed, tweeted again on Tuesday that the Fed was not lowering benchmark interest rates fast enough.

Source: AP