How central banks and markets are responding to the economic fallout of coronavirus

CNBC's Mike Santoli discusses the state of the economy and how central banks are responding with the"Squawk on the Street" team.

Central banking mandates could be permanently refocused away from inflation after the coronavirus crisis, economists have told CNBC.

The new coronavirus — which has infected 2.9 million people worldwide and killed more than 206,000 — is expected to spark a once-in-a-generation economic crisis, with the International Monetary Fund warning the world is soon likely to experience the worst recession since the 1930s.

Lockdown measures aimed at mitigating the spread of the virus have already led to record jobless claims in the U.S., with 26.4 million people filing for unemployment insurance in the five weeks to April 18. Job losses amid the crisis have now wiped out all of the job gains since the Great Recession.

According to Pushan Dutt, professor of Economics and Political Science at INSEAD, the economic fallout from the outbreak will prompt central bankers of the future to reshuffle their priorities.

Speaking to CNBC via telephone, he noted that a lot of today’s central bankers had grown up during the oil price shocks of the 1970s.

“So they have put a lot of weight on inflation — they are much less worried about unemployment,” he said. “The next generation of central bankers who take over would have grown up during the global financial crisis and the Covid-19 pandemic. These central bankers will put, in my opinion, more weight on reducing unemployment and they will worry far less about inflation,” whether it’s the Bank of England, the European Central Bank or the Federal Reserve.

Inflation is a measure of how much the price of goods and services have increased over time.

Many central banking systems, including the European Central Bank, U.S. Federal Reserve, Federal Bank of Australia and Bank of England, develop their monetary policy around price inflation targets, aiming to keep consumer prices rising at a stable level.

However, Joseph Gagnon, senior fellow at the Peterson Institute for International Economics (PIIE), pointed out that a refocus toward employment was most likely to happen outside of the United States.

For access to live and exclusive video from CNBC subscribe to CNBC PRO:


Turn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide.

Connect with CNBC News Online

#CNBC
#CNBC TV

[stewartprofessionalservice]

No cars east of Mississippi would sell some insurance junk bonds???

[rocky]

The market has got ahead of itself a little, stocks have readjusted.