The global economy is at the brink of sinking and suffering through disinflationary shock. This universal condition could push the economy into high-risk deflation territory in history ever.
Many countries are under lockdown, and many other countries can announce lockdown at any moment. It is only the safety measure to stop diffusing pandemic coronavirus. Prices of all the commodities are staggering from Crude oil to copper. Services prices are tumbling from hotel rooms to dine out.
Global Economist, Joseph Lupton from JP Morgan Chase & Co., said, “A strong disinflationary flood is rising.”
It’s troubling because it might be the deepest and worst recession after the great depression, 1930. The decrease in price and demand will make it more difficult for the corporates that are sitting on a massive pile of debt. It will make the companies opt for cost-cutting, lowering payroll, reducing employees, etc. In the worst situation, they will default on their obligations and will go bankrupt.
Once the world gets relief from pandemic coronavirus, the scare on the global economy for the shutdown will leave shattered consumers, unemployment, companies companies’ confidence, etc. Central banks will ask to hold interest rates at the lowest level for an extended period. Government agencies will keep prices check on essential items.
Bank of America Corp, Head of global economic research wing, Ethan Harris said Federal Reserve bank rates are at zero for the next minimum two years.