Monetary policy, inflation in The Monday Briefing
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In their response to the pandemic, Western governments have learned and applied many of the lessons of past crises.
Future historians are likely to conclude that a phase of breakneck globalisation that started in the 1970s drew to an end in the wake of the financial crisis 12 years ago. They will surely see the 2020 pandemic as having dealt a further, heavy blow to globalisation.
The pandemic has been vastly disruptive, arguably more so than any single event since the last war. It has also prompted powerful responses from government and the private sector. This week’s briefing considers six examples of adaptability and resilience.
One of the more remarkable features of the COVID-19 crisis has been the yawning gap between collapsing economic activity and rising equity markets. Investors had a torrid start to the year with the pandemic driving down risk assets and global equities by almost a third between by 23 March. But since then equities have staged a remarkable comeback and the global market is now down by just 1% so far this year.
Prior to the COVID-19 global pandemic, one of the biggest challenges facing the UK economy was undoubtedly sluggish productivity growth.
This summer holiday season will be like no other. Nonetheless, as we have done for the last 11 years, the end of July marks the launch of our summer reading list. The six articles aim to offer a stimulating read during quiet times on holiday, at home or maybe in the garden. All are available free and online.
The big data event for economists in the UK last week was the release of May GDP numbers. After a record 27% contraction in March and April, the easing of the lockdown from May was expected to generate a strong bounce in activity. The outcome, a disappointing 1.8% increase in GDP, has dented hopes of a swift, ‘V-shaped’ recovery.
The government response to COVID-19 has involved vast, debt-financed increases in public expenditure. The spending has been on a far greater scale than during the financial crisis. With interest rates close to zero fiscal policy is firmly in the driving seat.
The COVID-19 crisis has collapsed global economic activity, and with it, greenhouse gas emissions. The pandemic has brought cleaner air and skies across the world’s cities, but it also offers a glimpse of the scale of changes needed to mitigate the worst impacts of climate change.
The speed and severity of the economic downturn has been far greater than the last recession, in 2008–09. The 0.1% contraction in the global economy in 2009 now looks like a pinprick by comparison with the International Monetary Fund’s forecast that world GDP will shrink by almost 5% this year.