BIS: Central banks close to winning inflation battle

BIS: Central banks close to winning inflation battle

The Bank for International Settlements (BIS) said on Monday that central banks have taken decisive steps to prevent inflation from becoming entrenched and are close to achieving their goal of bringing it back under control. The BIS, which is often called the central bankers’ central bank, expressed “cautious optimism” in its latest quarterly report, which also examined the structural changes in inflation and interest rates after the COVID-19 pandemic. “

“Central banks have taken decisive action and thus prevented inflation from becoming entrenched,” said Claudio Borio, the head of the BIS’s Monetary and Economic Department. “At the same time, economic activity has been remarkably resilient and the financial system has held up well.” The BIS noted that financial markets have converged on central bank views, suggesting that monetary authorities had a better appreciation of the risks than investors.
 

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. The report also looked at the persistence of inflation and the level of neutral interest rates, which are neither too stimulative nor too restrictive for the economy. It concluded that inflationary pressures could become more persistent as services industries increase their weight in economies.

 

Headquarters of the Bank for International Settlements are seen in Basel

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while neutral interest rates could now be higher, although estimating them was very uncertain. It warned that using neutral interest rates as a “blurry guidepost” for monetary policy was very difficult in the current context. Hyun Song Shin, the BIS’s Head of Research, said that “it is going to be very difficult to utilize it in a very concrete way when we conduct monetary policy.

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Source : AP NEWS

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