The economic downturn caused by the Covid-19 pandemic has led experts and politicians to call for policy actions to be taken by the Federal Reserve. Any policy actions, however, may not result in the necessary potential benefits.

Mohamed A. El-Erian

Mohamed A. El-Erian, chief economic adviser at Allianz, shared an article on how the Federal Reserve should resist pressure to take additional policy actions such as negative interest rates, asset-purchase programmes and more aggressive forward guidance. Such policies, however, may lead to investment in risky assets and push their prices even higher.

The Federal Reserve may distort the market by interfering too much. The markets in turn may not send accurate price signals and fail to direct and mobilise capital, the article adds.

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Linda Yueh

Linda Yueh, economist at the University of Oxford, tweeted on the International Monetary Fund’s fiscal tracker. According to the tracker, China’s support packages for the Covid-19 outbreak including spending, loans and guarantees accounted for only 2.5% of GDP by April.

Comparatively, the support packages announced by Germany accounted for 34% of GDP, 20.5% for Japan and 11.1% for the US. The Chinese government is planning to pump more money into the economy to ensure rebound although experts have warned that this could lead to long-term pain.

Philip Smith

Philip Smith, an economist, shared a chart on the decline in GDP across various economies in the world in Q1. The chart shows that the GDP decline was much higher in France, Italy and Spain at more than 5.

Of the 16 nations that reported their numbers, Canada had the seventh deepest drop in GDP, while Sweden had the smallest decline at 0.3% owing to milder lockdown.

Howard Archer

Howard Archer, chief economic advisor to EY ITEM Club, shared an article on the purchasing manager’s report on UK’s manufacturing sector. The article notes that the manufacturing sector recorded a reduced contraction in May rising to 40.7 from a record low of 32.6 in March.

The consumer, investment and intermediate goods sectors were the weakest sectors, although healthcare and PPE showed growth.

Prof. Steve Hanke

Prof. Steve Hanke, an applied economist, shared an article on how the lockdown in India is pushing millions of people below the poverty line. The lockdown is expected to lead to a 6% contraction in India’s GDP, the article adds.

The article notes that the unemployment rate in India is estimated at 24% much higher than the US. The lockdown is further driving up the unemployment rate particularly among migrant workers who make up approximately 140 million of the country’s workforce.