The COVID-19 pandemic has turned the global economy upside down, forcing countries to implement strict lockdowns to control the virus. In response, central banks around the world have taken some of the most drastic actions we’ve ever seen, like slashing interest rates to nearly zero and launching huge programs to pump money into the economy. For example, the Federal Reserve’s emergency rate cuts and the European Central Bank’s Pandemic Emergency Purchase Programme are bold moves that go beyond the usual playbook to try to keep financial systems stable during this crisis.

But one big question remains: Are these measures enough to prevent a financial crisis while we’re still battling a health crisis? So far, they’ve helped calm financial markets by reducing wild price swings and keeping the money flowing, but the broader economy is another story. Lockdowns and social distancing have hit businesses hard, leading to layoffs, closures, and less spending by consumers. Recovering from this kind of shock will take time and more effort than just monetary policy.

This is where teamwork between central banks and governments becomes crucial. Central banks can make borrowing cheaper and keep the financial system running smoothly, but governments need to step in to directly help people and businesses. That’s why we’ve seen governments offering things like direct payments to individuals, wage subsidies, and support for small businesses. By working together, monetary and fiscal policies can create a more balanced recovery, helping both the financial system and the everyday economy.

This crisis is also pushing central banks to rethink their usual strategies. For example, the Federal Reserve has started allowing inflation to go a bit higher than normal in the short term to help support growth. Meanwhile, the Bank of Japan is using a strategy to keep long-term interest rates steady. Other central banks are paying attention and might try similar ideas to support their own economies.

These new tools and approaches signal a shift in how economic challenges are handled. Central banks are using every option they have to address a crisis unlike anything we’ve seen before. The success of these efforts will shape how we handle future crises. As central banks and governments continue adapting, their teamwork will be key to building a strong recovery and getting the world economy back on track.