The Day at a Glance | March 11 2020

No clarity regarding stimulus in the United States

According to John Hopkins University figures more than a thousand cases and 28 deaths have been recorded due to the new coronavirus, as markets await fiscal measures to be carried out to counteract the virus´s negative economic effects. One of the measures that is being considered is pushing back the April 15 tax filing deadline, according to Wall Street Journal. It´s expected this measure would help individuals and companies, but this would imply the Treasury increasing its debt in the short-run. President Donald Trump will meet with main bank (Bank of America, Citigroup, Wells Fargo, Goldman Sachs, JPMorgan) executives this afternoon in order to discuss estimates concerning this virus´s impact on markets, in addition to proposing possible reduction of some commissions or some type of support for consumers and small businesses for as long as the sanitary emergency lasts. Democrats will send the President a letter asking him to declare a state of emergency, which would allow him to access $40 billion dollars in resources from the Disaster Relief Fund and help state and local governments undertake the virus´s spread.

The Bank of England joins on monetary stimulus

For the first time since the 2008 financial crisis, the Bank of England cut interest rates to 0.25% (-50 bps) in an emergency meeting. Additionally, it introduced a low-interest credit program and reduced bank reserve requirements for them lend more money. The Bank´s Governor, Mark Carney, assured a temporary effect will be observed due to the virus, but if necessary, the Bank has room to take further action. With the BoE, Rishi Sunak, the British Minister of Finance, announced a $39 billion dollar (£30 billion) stimulus package to support the British people and their businesses in light of COVID-19´s impacts. The national public health system will immediately receive £5 billion to respond to the emergency, while people will receive financial support if they need to be quarantined (and forgo attending work), and businesses can obtain compensation for payment to workers who are absent on account of illness (for up to 14 full days).

Lagarde warns about crisis in Europe

The President of the European Central Bank warned that if European governments don´t immediately respond to the economic shock triggered by the coronavirus outbreak, Europe could head towards a crisis similar to the one seen in 2008. Lagarde commits to take action from the ECB starting tomorrow, when the Governing Council will meet to make a monetary policy decision. The ECB considers all tools it has at its disposal and foresees offering new loans and liquidity that would avoid credit coming to a stop. However, she called governments for them to also back the economy, assuring that banks continue to offer loans to the sectors most affected by the virus. Markets expect an increase in asset purchasing programs in tomorrow´s meeting, in addition to a 10 bps cut regarding the deposit rate (-0.6% e.)

Underlying inflation accelerates in the US

The underlying consumer price index recorded its largest increase in the last 5 months in February, highlighting an acceleration in inflation prior to the coronavirus´s impact on the United States. The underlying component stood at an annual rate of 2.4% (0.2% monthly), its highest rate since September 2008, upon an increase in shelter (0.3% monthly, 3.3% annual), apparel (0.4% monthly, -0.9% annual) and medical services (0.3% monthly, 5.3% annual). Energy costs fell 2% monthly, setting the overall index at 2.3% annual; a deceleration with respect to January.