One of the world’s top central bankers is urging governments to avoid pouring more money into the global economy at a time of crippling supply constraints.
One of the world’s top central bankers is urging governments to avoid pouring more money into the global economy at a time of crippling supply constraints, warning policymakers will be forced to jack up interest rates even further as a result.of global central bankers on Friday, Bank for International Settlements head Agustin Carstens said policymakers were navigating a “hostile supply environment” with “sobering implications” for how governments and central banks conducted economic policy.
“Continuing to rely primarily on aggregate demand tools to boost growth in this environment could increase the danger, as higher and harder-to-control inflation could result,” Mr Carstens said.“Scarce fiscal resources should instead be used to tackle supply constraints head on, including those imposed by climate change, ageing populations and infrastructure, through growth-friendly actions and support for broad structural reforms.
“In this environment, central banks cannot hope to smooth out all economic air pockets, and must instead focus first and foremost on keeping inflation low and stable. Monetary policy needs to meet the urgent challenge of dealing with the current inflation threat,” he said.The pandemic and the war in Ukraine were a “rude awakening” that showed global supply chains were not as efficient as had been assumed.
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