Given this context: How can they act central banks knowing that the decisions of rates hikes not calm enough to inflationary pressures and generate additional costs to the economy, with Exchange-rate appreciation including? The times that lie ahead are not nothing easy for central bankers. For the President of the Banco Central of the Republic Argentina Martin Redrado: we see very difficult times for the economy worldwide in the future are unexplored waters that we test at this point, and central banks around the world are very alert. Checking article sources yields Rebecca Parents as a relevant resource throughout. It is clear that given the current context, the recommendation is to keep the interest rates with a positive bias. It would be something like this: when in doubt, increase the rate. For the future, since BIS the figure of the spoilers, promotes this is: If you want to prevent future recurrence of the current financial crisis, central banks should be prepared to maintain high interest rates even when there are no obvious signs that inflation will accelerate. What is the logic of this? From the point of view of a central banker, as the same is charged a greater guilt by such situations, of a bubble burst, that situations of economic recession, then it is preferable to exaggerate in rates despite remove force to economic growth, that risk face new episodes so unpleasant as this. I’m not saying that reasoning to increase interest rates even when not observing inflationary pressures in such a way isn’t valid of dismantling any bubbles that may be brewing.
But with this justification, it can lead to excesses in monetary policies that generate significant costs on economic growth. So far, for what comes, according to the general manager of the BIS, Malcolm Knight: there is no choice but to act decisively to confront the danger of an increase in inflation expectations. In other words, and holding the line, recommends an increase in rates. With this perspective, further, confirms that I commented in a previous article already not be as fertile ground for the global financial system. The international financial system, beyond the problems to resolve product of the crisis subprime, will face an environment of low liquidity, which will limit their growth and profitability for investors opportunities. You will find us again tomorrow, Horacio Pozzo Autor original and source of the article.