Covid brings regime change for world’s central banks

TheStar Fri, Nov 13, 2020 07:40am - 3 years View Original


Dual action: A man walks past the BoE. British policymakers emphasised the power of dual action on March 11, when a BoE emergency rate cut was explicitly timed hours before the government outlined its own spending plans, and stress their ongoing coordination. — AFP

JUST eight months after they swung into action to avert a crippling depression and credit crunch, central banks are in the uncomfortable position of relying on governments to power fragile economic rebounds.

The decisions their counterparts make will affect not just the growth outlook for the next few quarters, but could shape central banks’ policy options, and even their credibility, for years to come.

Monetary authorities entered the Covid-19 crisis with the least conventional policy space – namely, interest-rate cuts – of any post-war downturn. After pulling down borrowing costs near or even below zero and deploying massive asset-purchase programmes, they are now practically begging governments to step up.

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