2020's Black Swan: Coronavirus...Talks at GS With Infectious Disease Expert Peter Piot...Briefly on Global Growth and Monetary Policies

[Goldman Sachs]( [BRIEFINGS] March 3, 2020 Top of Mind: Coronavirus Coronavirus is no doubt the black swan of 2020, prompting an unprecedented lockdown in China with knock-on effects to global supply chains now starting to emerge. At the same time, the number of international cases—and disruptions to economic activity—continues to rise. In the latest edition of Top of Mind, Allison Nathan interviews Harvard’s Dr. Barry Bloom and University of Minnesota’s Dr. Michael Osterholm to better understand what we know—and don’t know—about the virus today. They explain that coronavirus is proving more virulent and contagious than the common flu, and its ability to be transmitted while patients are asymptomatic makes containment more challenging. Both think wider international spread is therefore likely, but Dr. Bloom thinks restrictive control measures can nonetheless be helpful: “What China’s success has taught us is that stringent control measures…can reduce the spread of a major localized outbreak. These measures won’t stop an epidemic, but they will slow it down…And that is critical because it…allows public health systems to be better prepared and avoid becoming overwhelmed.” Given disruptions to activity and consumption in affected areas, as well as spillover effects on global supply chains, our economists have substantially reduced global growth expectations to about 2% this year and now think central banks around the world will cut rates to help offset the economic blow. That includes the Fed; as of now, GS economists expect the Fed to cut rates by 100bp by June, with 50bp coming by their next meeting on March 18. They discuss their forecast changes in the webcast excerpt below. [Read Top of Mind]( [Listen to webcast]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Top%20of%20Mind%3A%20Coronavirus&body= Talks at GS With Infectious Disease Expert Peter Piot Above (L to R): Sally Boyle of Goldman Sachs and Peter Piot of the London School of Hygiene and Tropical Medicine Peter Piot helped discover the Ebola virus in 1976 and led the fight against its outbreak in West Africa from 2014 to 2016. In the latest episode of Talks at GS, the microbiologist discusses what he learned from that effort and how it applies to the current spread of coronavirus, emphasizing the importance of early detection and diagnosis. “The priorities when it comes to health is healthcare and hospitals,” he said. “But we are acting as if we would only put together the fire brigade when a house is on fire.” He said those priorities need to change as we confront new public health challenges. “You need a fire brigade that’s constantly there. You hope they will be without a job for the rest of your life, but you need that and you need fire drills.” [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Talks%20at%20GS%20With%20Infections%20Disease%20Expert%20Peter%20Piot&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Ftalks-at-gs%2Fpeter-piot.html) Briefly...with Economist Raghuram Rajan on Monetary Policy, Trade and Communities [ Above (L to R): Economist Raghuram Rajan and Katie Koch of Goldman Sachs Raghuram Rajan, former chief economist for the International Monetary Fund (IMF) and India’s former central banker, shared his views on monetary policies, the risks to global supply chains and the importance of communities in a wide-ranging conversation with Katie Koch, co-head of Goldman Sachs Asset Management’s (GSAM) Fundamental Equity business, at a GSAM Forum event in New York. What follows are excerpts from their conversation. Katie Koch: Let’s start off with the global perspective: Where do you think we are in the economic cycle and how much further you think we have to go in the US? Raghuram Rajan: What is interesting is that we have a global economy which continues to be chugging along at a mediocre pace—neither too hot nor too cold—which doesn’t have enough momentum to take off but is not so bad that it plunges into a recession either. And if—and this is a big if—coronavirus is contained, there’s no reason why we won’t see this continue for some time. Of course, monetary tightening is one of the factors that could disrupt this process, but central banks, including the Federal Reserve, have indicated that further tightening is off the table for now. Katie Koch: If the central banks are preferring to run economies “hot,” why have we seen so little inflation—despite relatively tight labor markets? Raghuram Rajan: If you talk to business owners today, they will tell you they can’t find people to hire even though they’re willing to pay more. One possibility—which we’ve seen in Japan—is that with an aging population, you’ll have older employees retiring and younger people moving in. So while companies may be paying the new people higher wages, the average wage bill won’t be increasing as much given that the experienced, more expensive, employees have moved on. The other comparable period where we had low inflation and tight labor markets was in the mid-1960s. At the time, we had similar conditions before inflation suddenly took off. Inflation will reassert itself at some point, but I think we have some room. Katie Koch: Given your experiences at the IMF and at India’s central bank, what do you make of the rising populism around the world and whether that could be a potential constraint on growth and trade? Raghuram Rajan: If you notice where the protests are taking place, they’re in the areas where the populations haven’t benefited as much from globalization, technology improvements and trade. That’s creating internal frictions and we’re seeing the type of policy paralysis that we have in Washington today being replicated across other countries. And when you have internal policy paralysis, you don’t have strong growth. At the same time, we’re seeing renewed focus on the efficiency and risk exposures of global supply chains. So when you have a problem in China—such as coronavirus disrupting global supply chains—you’re going to see a pulling back on trade and potentially some re-shoring of manufacturing jobs. Read more of [Dr. Rajan’s interview]( on monetary policy, India’s growth prospects and the role of communities in modern society. SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Briefly...with%20Economist%20Raghuram%20Rajan%20on%20Monetary%20Policy%2C%20Trade%20and%20Communities&body=) Goldman Sachs Media Highlights CNBC - March 2 [Coronavirus could cause demand shock based on consumer behavior: Hatzius]( (5:36) CNBC - March 2 [Why Currie says oil’s seeing its biggest hit in more than a decade]( (4:30) Bloomberg - February 27 [Goldman’s Kostin Sees No S&P 500 Earnings Growth in 2020]( (1:35) Bloomberg - February 27 [Podcast: A Welcome Wake-up Call with Kathy Matsui]( (21:21) [Subscribe]( [Unsubscribe]( The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. Goldman Sachs believes the data in this newsletter is accurate, but does not verify its accuracy independently and does not warrant or guarantee that it is accurate or complete. Goldman Sachs has no obligation to provide any updates or changes to the data. No investment decisions should be made using this data. To the extent this newsletter includes material from the Goldman Sachs Securities Division, please click [here]( for information relating to Securities Division material and your reliance on it. © 2020 Goldman Sachs, All rights reserved. 200 West Street, New York, NY 10282, USA [GS.com]( | [Careers Blog]( | [Privacy and Security]( | [Terms of Use]( [Facebook]( [Twitter]( [LinkedIn]( [YouTube]( [Instagram](