|
The
BIS, often referred to as the central bankers' bank, has been
calling for a robust attack on inflation over the last year
having, like most major institutions, initially underestimated
the impact COVID-era stimulus would have.
Speaking in Brazil, Agustín Carstens, the bank's general
manager, said a tough response to inflation was fundamental for
maintaining trust in central banks' ability to keep economies on
an even keel.
"If trust evaporates, the capacity to make effective public
policies disappears," Carstens said, explaining that it was the
first time younger generations in many countries had experienced
inflation eroding living standards.
Once it takes hold, inflation can become increasingly difficult
to stop, Carstens said.
Cooling price pressures was essential, he added. "Otherwise, the
credibility of monetary policy, and the autonomous central banks
responsible for implementing it, will be called into question."
Carstens' comments come as one of the fastest and most
comprehensive increases in global borrowing costs in history
shows signs of coming to an end.
Financial markets are pricing in a strong chance that the U.S.
Federal Reserve, which has led the charge global higher over the
last 18 months, will start cutting its rates towards the end of
this year.
Carstens said maintaining trust in the banking sector was no
less important than in a central bank and took aim at
cryptocurrencies, the risk of a "two-tier" monetary system, and
the increasing role of firms other than traditional-style banks.
"The need for greater supervision and regulation of the non-bank
sector has become more pressing in the light of recent episodes
of instability," he said.
Turning back to the inflation battle, he said the process could
run into obstacles, particularly as policymakers try to get it
back to their preferred sweet spot, which is around 2% for the
Fed and other major central banks.
"Over the coming years, monetary policy should focus squarely on
bringing inflation back to levels consistent with central bank
objectives".
(Reporting by Marc Jones; Editing by Christina Fincher)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|
