Rate cuts can’t save the global economy from the coronavirus - analysts

CNBC reports that investors are expecting the U.S. Federal Reserve - and other central banks globally - to do more to rescue the global economy from a downturn caused by the ongoing coronavirus crisis.

The Fed lowered its benchmark rate by 50 basis points in an off-schedule meeting this week. But traders have priced in another cut at the next scheduled Fed meeting on Mar. 17-18.

But some economists and strategists said monetary policy tools - such as interest rates - may not do much to help the global economy weather shocks from the coronavirus disease, which is also known as COVID-19.

"The idea is deeply ingrained in financial markets that, when there is a major global economic downturn, central banks quickly come to the rescue with aggressive policy rate cuts," analysts from Japanese bank Nomura wrote in a report.

"Markets are anticipating the same policy playbook even though this COVID-19-induced economic downturn is different from others," they added.

The analysts explained that the current economic slump is not caused by financial events such as asset prices running ahead of fundamentals. Instead, it's triggered by a spread of a new virus, so "the best immediate response" is "first and foremost health security policies," they said.