Loose monetary policy makes outlook murky

COVID-19 will change society, business and the global economic order in many ways. What was unusual about this recession was that it was not triggered by economic or market factors such as interest rate hikes or property bubbles bursting, but by government policies to restrict economic activity to contain the spread of a disease.

Structural change inevitably follows a major world shock like this, and the next few years will challenge every assumption we have made in the past. To mitigate the massive economic impact on society, 2020 brought an unprecedented fusion of fiscal and monetary policy.

Governments ran an aggregate deficit of over 11 per cent of global GDP in 2020, while the world's top five central banks' balance sheets will reach an estimated US$25 trillion, with the Federal Reserve's balance sheet alone reaching US$8.5 trillion.