RBC chief sees more than just rate cuts to offset virus impact

by Steve Randall11 Mar 2020

Canada’s economy is expected to suffer at least short-term impact from the COVID-19 coronavirus outbreak and will require more than simply interest rate cuts.

That’s the assessment of RBC Chief Executive Officer David McKay who said Tuesday that the global economy will be weakened by the virus crisis and governments will need to collaborate to offset the decline.

“I don’t think purely monetary rate cuts are going to satisfy the disruption that’s coming out to corporate cash flows and consumer cash flows,” McKay told Bloomberg, urging a coordinated response between rate cuts and “effective and targeted stimulus.”

Speaking to attendees of the RBC Capital Markets Global Financial Institutions Conference in New York – a webcast instead of the planned physical event due to the virus – McKay said that if the unlikely event that negative interest rates are implemented in North America, it would be painful from an investment perspective.

Prolonged impact
McKay set out three scenarios including the virus being under control with four to six weeks, leading to a smaller hit to economic growth; a 6-8 month period of disruption; and the worst-case scenario of a prolonged period of turmoil.

“You’ve got to think along those lines and think through your strategies as a business in that context, because I don’t think any of us really know yet which of those variations and hybrids of those scenarios are going to come into play,” he said.

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