Central Bank asset purchases in response to the COVID-19 crisis

Large-scale asset purchases by central banks in response to the Covid-19 pandemic were broadly successful in addressing disruptions in monetary policy transmission and providing additional stimulus. In this report, the Committee on the Global Financial System (CGFS) examines the experience of central banks in many small open and emerging market economies that conducted asset purchases for the first time during the Covid-19 crisis as well as in large-advanced economies that expanded or reintroduced purchases.

The impact of asset purchases and relative importance of various transmission channels differed across time and economies. The liquidity channel, whereby purchases improved financial market liquidity, was particularly important during the early weeks of the Covid-19 crisis, when markets were stressed.

In many countries a strong economic rebound and surge in inflation prompted central banks to stop asset purchases within a year or two and to start raising policy rates. The report notes that the relatively short time span of the purchases thereby reduced the risk of unintended side effects.