G7 pledges to mediate coronavirus fallout as US fed slashes rates

G7 finance officials pledged on Tuesday to act to safeguard against risks posed by fast-spreading coronavirus as the United States Federal Reserve implemented its first -and biggest- surprise interest rate cut since the 2008 financial crisis.

The move came as G7 finance ministers held a phone call to discuss how to hold up the economy and markets, the latter of which last week saw its worst week since 2008. Speaking to reporters after the call, Japanese Finance Minister Taro Aso said that “anything will be included, both monetary and fiscal steps” to support price stability. 

“We reaffirmed our commitment to adopt all appropriate policy steps to protect the economy from downside risks posed by the coronavirus, and that we stand ready to cooperate further on timely and effective measures,” Aso said.

German Finance Minister Olaf Scholz also said the G7 had “all means” at its disposal. “Should the need arise, we have all the means to counter a global downturn,” Scholz said in a statement on Twitter.

Global stocks suffered a rout last week on fears that the disruption to supply chains, factory output and global travel caused by the epidemic could deal a serious blow to a world economy trying to recover from the US-China trade war.

The coronavirus, which emerged in the central Chinese city of Wuhan late last year, has spread around the world over the past week, with more new cases now appearing outside China than within. There are more than 90,000 cases globally, with more than 80,000 of them in China, and infections appearing in 77 other countries and territories, with Ukraine the latest country to report its first case.

After what critics said was an initially hesitant response, China imposed sweeping restrictions, including suspensions of transport, sealing off communities, and extending a Lunar New Year holiday across the country.

Now, China is increasingly concerned about the virus being brought back into the country by citizens returning from new hot spots elsewhere. Authorities on Tuesday asked overseas Chinese to reconsider or minimise their plans to travel home. All travellers entering Beijing from South Korea, Japan, Iran and Italy would have to be quarantined for 14 days, a city official said. Shanghai has introduced a similar order.

The most serious outbreak outside China is in South Korea where President Moon Jae-in declared war on the virus, ordering additional hospital beds and more masks as cases rose by 600 to nearly 5,000. Thirty-four people have died in South Korea.

In the United States, where the Federal Reserve announced it was slashing interest rates by a half a percentage point on Tuesday, the virus is now believed to be present in at least four communities in the Pacific Northwest. Six people have died in the Seattle outbreak. The US Centers for Disease Control and Prevention lists more than 90 cases across the US.

Iran reported infections rising to 1,501, with 66 deaths, including a senior official. The death toll in Italy jumped to 52 on Monday from 34 the day before and the total number of confirmed cases in Europe’s worst-affected country climbed past the 2,000 mark. Germany reported 31 new infections, taking its tally to 188.