- For the first time, 60 per cent of the global economy’s central bank interest rates have fallen below 1 per cent.
- The interest rates of 20 per cent of the world’s central banks have turned negative
Geeta Gopinath, chief economist at the International Monetary Fund (IMF), has urged governments around the world to provide recovery and relief packages for the economy, which has fallen into a liquidity trap due to the Covid-19 epidemic.
Decrease in interest rates
In an article in the Financial Times, Geeta Gopinath said that for the first time, 60 per cent of the global economy has fallen below the central bank’s interest rate of 1 per cent, which includes 97 per cent advanced economy. While 20 per cent central bank interest rates have turned negative. He further said that despite the sharp fall in interest rates, the central banks are ready for further cuts in interest rates for a tough time. On Monday, Gopinath said the world economy is currently in a liquidity trap, where the impact of monetary policy is limited. This is why we need to agree on more plans.
He has advised increasing the demand by transferring cash to the Fiscal Authority in the world. Because it will see growth in consumption. Gopinath has been told to invest heavily in medical facilities, digital infrastructure and environmental protection. This will create new employment opportunities and also encourage private investment. At the same time, the foundation of recovery will be strengthened. However, a relief package is not always a good option. Because of the cost in different sectors, public investment has to be increased for economic growth.
Decline in the economy
The World Economic Outlook report was released last month. It predicts a 4.4 percent decline in the global economy for IMF 2020. The IMF said the economic woes caused by the Corona epidemic would last a long time.