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US Government Officials Play Down Effect of Coronavirus on Economy, Coordinated Global Rate Cut Coming Soon?

Over the weekend, senior government officials in the US sought to reassure markets about the possibility of a recession in the global economy even as they maintained confidence in the strength of the US economy. These comments came in the wake of the prolonged sell-off taking place on Wall Street, with SPX losing more than 11% over the past week while the demand for US Treasuries rises and yields fall.

Although the US is yet to report too many cases of coronavirus, the sell-off in equities is expected to dent consumer spending and impact the economy as a result. Meanwhile, Vice President Mike Pence stated that the US economy is in a good place with record low unemployment levels, robust consumer confidence and housing market.

However, a leading economist at a US Bank lobby and former Fed official claims that the US central bank and other leading central banks could cut rates as soon as this week in response to the fast spreading outbreak. According to chief economist at Bank Policy Institute, Bill Nelson, a coordinated global interest rate cut by main central banks could be implemented as soon as this Wednesday.

Global central banks could cut interest rates by as much as 0.5% and include mention of forward guidance as well. A significant rate reduction is necessary to get a positive reaction from financial markets that are struggling over worries of the coronavirus turning into a global pandemic and slowing down economic growth worldwide.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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