On monetary policy and financial markets
5 months ago

On monetary policy and financial markets

The Hindu  

Global financial markets may be exhibiting recovery following the dramatic falls in value, but the global economy is still in uncharted waters. The Bank of Japan’s decision to raise interest rates after years of keeping them low has also rattled financial markets, setting off a reversal of equity flows and a collapse in Asian markets. The carry trade On the other side of the world, Asian markets were rattled by the increase in interest rates by the Japanese Central Bank following long periods of low rates. Low Japanese interest rates have led to what is known as the “carry trade”, where foreign investors take advantage of low rates to borrow from Japan and invest in foreign markets. Monetary policy in financial markets Financial markets have shown signs of recovery following these intense bouts of selling pressure, with many claiming that threats of recession are overblown, even though vulnerabilities remain.

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History of this topic

Dollar’s Resurgence Is a Headache for the Rest of the World
1 year, 3 months ago

Dollar’s Resurgence Is a Headache for the Rest of the World

Live Mint  

The dollar bounced back with a vengeance in the third quarter, threatening global central bankers’ tricky task of bringing down inflation while protecting fragile economic growth. “The markets have consistently tried to price in rosy scenarios which were associated with a weaker dollar and they continue to be surprised that the reality isn’t quite as rosy,” said Maurice Obstfeld, former …

The world seems headed for a mild output contraction
1 year, 5 months ago

The world seems headed for a mild output contraction

Live Mint  

There are currently four scenarios for the global economic outlook. The most positive is a ‘soft landing,’ where central banks in advanced economies manage to bring inflation down to their 2% targets without triggering a recession. If the effort to tame inflation triggers severe economic and financial instability, a fourth scenario becomes possible: central banks wimp out and allow for …

Should monetary policy be used to target financial stability?
1 year, 9 months ago

Should monetary policy be used to target financial stability?

Live Mint  

The recent turmoil in US financial markets, triggered by the collapse of Silicon Valley Bank, has raised questions about the impact of the Fed’s monetary policy on the stability of the banking system. Expecting monetary policy to also keep an eye on financial stability will distract attention from the central bank’s legally mandated objective and may lead to destabilising outcomes …

The US Federal Reserve needs four major failure correctives
2 years, 5 months ago

The US Federal Reserve needs four major failure correctives

Live Mint  

Global economy watchers and market participants will be paying a lot of attention this week to how the US Federal Reserve describes the American economic outlook, to the magnitude of its interest rate increase and whether it changes the pace of its balance-sheet contraction. Yet, for the well-being of the US and also the global economy in general, the answer …

Fed policy a risk for Asia's recovery
2 years, 9 months ago

Fed policy a risk for Asia's recovery

China Daily  

Editor's note: The US Federal Reserve makes decisions with the sole aim of boosting the US economy. Interest rate hikes in the US have significant impacts on Asian economies through trade, exchange rate, and financial market channels. In fact, empirical evidence shows that local interest rates in Asian developing economies respond to short-term US rates in a strongly positive manner …

Fed policy a risk for Asia's recovery
2 years, 9 months ago

Fed policy a risk for Asia's recovery

China Daily  

Editor's note: The US Federal Reserve makes decisions with the sole aim of boosting the US economy. Interest rate hikes in the US have significant impacts on Asian economies through trade, exchange rate, and financial market channels. In fact, empirical evidence shows that local interest rates in Asian developing economies respond to short-term US rates in a strongly positive manner …

Central banks told not to panic in face of inflation spike
3 years, 1 month ago

Central banks told not to panic in face of inflation spike

Live Mint  

Central bankers should hold their nerve as they watch the global economic recovery slowing, imbalances persisting, and a stronger and longer-than-expected inflation surge cast a shadow over the outlook, the OECD said. “In current circumstances, the best thing central banks can do is to wait for supply tensions to diminish and signal they will act if necessary,” OECD Chief Economist …

Financial Markets Respond To Signs Of Global Economic Slowing
5 years, 4 months ago

Financial Markets Respond To Signs Of Global Economic Slowing

NPR  

Financial Markets Respond To Signs Of Global Economic Slowing NPR's Rachel Martin talks to Mohamed El-Erian, chief economic adviser at Allianz, about what's behind recent domestic and international market instability, and how that could affect U.S. consumers. Having said that, what is harming the global economy right now, it's much - it's way beyond the Fed. It's the fact that, …

World economy facing delicate moment, IMF chief economist Gita Gopinath
5 years, 9 months ago

World economy facing delicate moment, IMF chief economist Gita Gopinath

Live Mint  

Describing current global economic atmosphere as "a delicate moment", IMF chief economist Gita Gopinath Tuesday said that while the global economy continues to grow at a reasonable rate and a global recession is not in the baseline projections, there are many downside risks. "While the global economy continues to grow at a reasonable rate and a global recession is not …

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