Central Banks Need to Sober Up for This Panic
Cutting rates to fight the coronavirus is just putting more pressure on lenders like HSBC, Citi and StanChart.
What’s keeping the big international banks in Asia awake at night?
Photographer: Anthony Wallace/AFP/Getty Images
Remember the proverbial drunk looking for his wallet under the lamppost, and not where it may have fallen? Global monetary czars are behaving a lot like that.
To them, containing the impact of the coronavirus seems to be all about lowering the price of money. While that shores up asset prices that are tumbling globally, the effect on actual activity, particularly in ravaged Asian economies, could be the opposite of what’s intended. Multinationals don’t need cheap money as much as they need banks that can confidently commit more capital to Asia, where demand will rebound after the disease subsides. For central banks to reduce lenders’ profit margins by slashing interest rates cuts them off at the knees. And that could, in turn, hurt corporate expansion.