TORONTO, March 10 (Reuters) - Royal Bank of Canada Chief Executive Officer Dave McKay said on Tuesday "fairly material short-term impact" from global measures to contain the coronavirus outbreak is likely, although the economic effects remain difficult to predict.
But he warned that interest rate cuts alone may not be sufficient to deal with the situation after Canadian and U.S. central banks last week cut key rates by 50 basis points to gird against the fallout of the outbreak.
"I don't think purely monetary rate cuts are going to satisfy the disruption," McKay said, adding that there are ongoing dialogues with governments around the world around coordinated and targeted fiscal stimulus.
On Monday, RBC confirmed that one of its employees had tested positive for the coronavirus. Canadian banks including RBC have joined global counterparts in splitting their trading operations to reduce disruptions due to the outbreak.
"An abundance of caution is appropriate as we try to figure out how to get global control" of the coronavirus, McKay said at the RBC Capital Markets Financial Institutions Conference in New York, which was held as a remote event due to the outbreak.
More than 114,000 people have been infected with the virus and over 4,000 have died, according to a Reuters tally of government announcements.
Airlines and tourism have been particularly hard hit, and global supply chains have been disrupted as a result of the outbreak.
McKay said he envisions three economic impact scenarios: where the crisis is contained within four to six weeks, leading to a V- or U-shaped economic recovery; where the disruptions remain for six to eight months, slowing demand and hitting industries; and the worst-case scenario, where it continues for a prolonged period.
"I don't think any of us really know yet which of those variations and hybrids of those scenarios will come into play," he said.
U.S. President Donald Trump said he will discuss a payroll tax cut with congressional Republicans on Tuesday as part of efforts to protect against the impact of the outbreak.
Despite the expectation of more interest rate cuts, McKay said a fall into negative rates appears unlikely in the United States and Canada.
There are "large questions about whether (negative rates) have been effective or not in the European experiment," he said. "I get the sentiment from central bankers that we’d have to expend all coordinated fiscal and monetary stimulus down to zero before we’d consider negative rates." (Reporting By Nichola Saminather Editing by Chizu Nomiyama and Steve Orlofsky)