There is global panic at the thought of a Covid-19 pandemic. That has provoked extreme action from the US Federal Reserve, which made an out-of-turn 50-basis-point rate cut for the first time after October 2008. The Fed Fund policy rate pair is down to a band of 1-1.25 per cent.
The Fed cut is likely to lead to copycat actions by other central banks, including the People’s Bank of China. Since US inflation is running at 2.5 per cent, this is a deeply negative real interest rate for America. Japan and the European Union have nominally negative rates already, and lower
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