G-7 Pledges Coronavirus Action, Including Fiscal Tools, After Emergency Meeting

Mnuchin and Powell lead teleconference call that vows G-7 will use "all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."
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Finance ministers and central bankers from the G-7 pledged Tuesday to "closely monitor" financial market developments amid the current coronavirus crisis, but stopped short of offering specific coordinated policy action to cushion the impact on the world's most-developed economies.

In a statement released following an emergency conference call among the G-7 members, co-chair by U.S. Treasury Secretary Steve Mnuchin and Federal Reserve Chairman Jerome Powell, the leaders said they "stand ready" to cooperate further on timely and effective measures", including fiscal tools, but made no mention of interest rate reductions. It was only the fourth emergency meeting of the G-7 leaders since the 2001 terrorist attacks on New York and Washington.

"Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks," the statement said. "Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase."

"G7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system," the statement added.

The lack of clarity on coordinated rate cuts, at least at this time, clipped earlier gains for U.S. equity futures, which now suggest a 244 point decline for the Dow Jones Industrial Average - which gained nearly 1,300 points last night -- and a 26 point pullback for the S&P 500, which gained 4.6% yesterday, at the start of trading. 

Coronavirus cases have been accelerating at a rate that is eight times faster outside of China -- the epicenter of the outbreak -- than inside, with the number of non-China infections now estimated at nearly 11,000.

The Reserve Bank of Australia cut its key lending rate to a record low 0.5% overnight in an effort to ensure that China's impending slowdown from the virus will have a limited impact on its domestic economy.

The European Central Bank also vowed ready to take "appropriate and targeted measures" to fend off what President Christine Lagarde called a "fast developing situation, which creates risks for the economic outlook and the functioning of financial markets" in a late Monday statement.