RBA’s Philip Lowe to chair central bankers’ planning for virus response

The meeting will hear from the central bankers around the world on their assessment and proposed responses to the crisis.

Reserve Bank governor Philip Lowe. Picture: AAP

The Reserve Bank of Australia governor Philip Lowe was due to discuss potential responses to the coronavirus crisis with central bankers on Wednesday night, chairing a crucial meeting of the Bank of International Settlement’s Committee on the global financial system.

Lowe chairs the committee, which monitors developments in financial markets and financial systems, with representatives of central banks in the US, China, Canada, the UK, Europe, South Korea, Mexico, Canada and India.

The regular meeting of the committee, which was set up as a forum for discussing potential threats to the stability of financial markets and the global financial system, comes at a crucial time for central banks around the world as they consider their response to the coronavirus crisis and sharp swings in financial markets.

The committee makes recommendations to central banks to about how best to fulfil their responsibilities for monetary policy and financial stability.

Its meeting comes after the Reserve Bank of Australia cut its cash rate by 25 basis points to a record low of 50 basis points last week and the US Federal Reserve Board surprised the market by slashing its federal funds rate by a more aggressive 50 basis points to achieve a target range of one to 1.25 per cent in response to the crisis.

The committee meeting is expected to hear from the central bankers around the world on their assessment of the seriousness of the situation in their countries and their proposed responses to the crisis.

The meeting is expected to include representatives from the Bank of Italy, the European economy currently hardest hit by the crisis which this week announced plans to lock down the country in a bid to contain the crisis and the Bank of Japan.

The Bank of International Settlements’ website describes the committee as having “particular emphasis on assisting central bank governors in recognising, analysing and responding to threats to the stability of financial markets and the global financial system.”

It is charged with the responsibility of looking at policy responses and policy recommendations “to promote the development of well functioning and stable financial markets and systems.”

Its meeting comes at a time when the Federal Reserve, the Reserve Bank and other central banks are considering potential implications of responding to the potential economic slowdown with quantitative easing with official cash rates now running at record lows.

The committee produced a detailed paper last October on unconventional policy tools across member countries which have been used in the wake of the global financial crisis.

The paper lays the groundwork for future unconventional monetary policy responses to future crises.