The Bank for International Settlements — the Swiss-based financial
institution that acts as a counterparty to national central banks — has declared that stock markets are currently in a "euphoric" state
and has urged central banks globally to begin tightening interest rate
policies now while economies are growing rather than wait for another
recession, when it will be too late.
Those are scary words, coming from a set of economists whose job it is to monitor how capable central banks are of responding to economic conditions with flexible monetary policy.
The subtext (and not-so-subtext) of BIS's annual report is that because many central banks have reduced interest rates to zero — the U.S. and Japan included — they are currently without weapons to boost the economy should another crisis hit. You can't go lower than zero, basically.
Those are scary words, coming from a set of economists whose job it is to monitor how capable central banks are of responding to economic conditions with flexible monetary policy.
The subtext (and not-so-subtext) of BIS's annual report is that because many central banks have reduced interest rates to zero — the U.S. and Japan included — they are currently without weapons to boost the economy should another crisis hit. You can't go lower than zero, basically.
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