Fitch predicts central banks will spend US$6T on QE

The world’s central banks are forecast to spend US$6 trillion on quantitative easing (QE) measures this year as they buy up large quantities of assets as part of their efforts to combat the effects of the Covid-19 pandemic on the global economy and financial markets.

In a new report, Fitch Ratings said that global asset purchases by central banks have ramped up sharply in recent weeks. For instance, the U.S. Federal Reserve Board grew its balance sheet from US$4.3 trillion in mid-March to US$6.5 trillion by late April.

“Central banks’ balance sheets are expanding extremely rapidly as they buy up large quantities of public and private assets and increase their lending to financial institutions in their efforts to counter the damaging economic impact of the coronavirus,” Fitch said.

Since mid-March, the Fed bought US$1.4 trillion worth of US Treasuries, exceeding its purchases during the global financial crisis, while also expanding its balance sheet through currency swaps with other central banks, expanding existing credit facilities and introducing new programs to support markets.

The central banks in Canada, Europe, the U.K. and Australia are rapidly growing their own balance sheets too, Fitch said.

“Six trillion dollars is a staggering amount that is equal to more than half the cumulative global QE total seen over 2009 to 2018,” said Robert Sierra, director at Fitch.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.