Central banks in developed nations are confronting the limits of their
ability to aid economic recovery as government efforts to strengthen
their finances fall short, the Bank for International Settlements said.
“Central banks are being cornered into prolonging monetary stimulus
as governments drag their feet and adjustment is delayed,” the Basel,
Switzerland-based BIS said in its annual report, published Sunday. “Both
conventionally and unconventionally accommodative monetary policies are
palliatives and have their limits.”
While central banks’ actions were key to limiting damage from the
collapse of Lehman Brothers Holdings Inc., interest rates are now “as
low as they can go” and debt purchases have swollen central bank balance
sheets, the BIS said. European Central Bank President Mario Draghi has
indicated that the ECB is close to exhausting its tools after cutting
its benchmark rate to a record low and flooding the banking system with
cash.
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