With the coronavirus (COVID-19) posing the biggest threat to the global economy since the 2008 global financial crisis, the Reserve Bank of India (RBI) on Tuesday said the central bank is ready to take appropriate actions for the orderly functioning of the financial markets. The Sensex rallied 480 points on hopes of a co-ordinated global action by central banks to revive the growth hit by the coronavirus.
The assurance from the RBI — which took a host of measures, including a steep 425-basis point-cut in the repo rate to salvage the economy during the 2008 global financial crisis — came after the Group of Seven (G7) finance ministers and central bankers on Tuesday discussed how to respond to the virus threat. Global markets rallied on Tuesday on hopes of global stimulus, especially from central banks. On Tuesday, Malaysia’s central bank cut its key policy interest rate by 25 basis points to a 9-year low of 2.5 per cent while Australia cut its policy rate to a record low of 0.50 per cent.
“The RBI is monitoring global and domestic developments closely and continuously and stands ready to take appropriate actions to ensure orderly functioning of financial markets, maintain market confidence and preserve financial stability,” the RBI said.
Globally, financial markets have been experiencing considerable volatility, with the spread of the coronavirus triggering risk-off sentiments and flights to safe haven. “Spillovers to financial markets in India have largely been contained. Growing hopes of coordinated policy action to mitigate a broader fallout to economic activity has boosted market sentiment today,” the RBI said.
The Reserve Bank of Australia on Tuesday cut official interest rates to a new record low due to the “significant effect” of the coronavirus outbreak on the Australian economy and has signalled it is prepared to cut further if needed. Malaysia’s central bank said the cut was meant to provide a “more accommodative monetary environment” to support growth ahead of a slowdown.
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