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Push on with the 'great unwinding', BIS tells central banks
Major central banks should press ahead with interest rate increases, the Bank for International Settlements said on Sunday, while recognizing that some turbulence in financial markets will have to be negotiated along the way. [this is code for a market dip]
The BIS identified four main risks to the global outlook in the medium-term.
A sudden flare-up of inflation which forces up interest rates and hurts growth, financial stress linked to the contraction phase of financial cycles, a rise in protectionism and weaker consumption not offset by stronger investment.
"Since we are now emerging from a very long period of very accommodative monetary policy, whatever we do, we will have to do it in a very careful way," BIS's head of research, Hyun Song Shin, told Reuters.
"STAY THE COURSE"
"If we leave it too late, it is going to be much more difficult to accomplish that unwinding. Even if there are some short-term bumps in the road it would be much more advisable to stay the course and begin that process of normalization." Shin added that it will be "very difficult, if not impossible" to remove all those bumps.
The question for central bankers, therefore, is whether new technologies and working practices had fundamentally changed the inputs in their economic models and whether it is right to keep such a heavy focus on keeping inflation at certain levels -- near 2 percent for likes of the European Central Bank and U.S. Federal Reserve.
"Inflation is certainly not the only variable that matters ... and we should keep one eye at least on financial developments," Shin said.
A broadening away from inflation-targeting to financial market conditions would require a mindset change in large parts of the world and could speed up interest rate cycles.
When the U.S. Federal Reserve last embarked on rate increases more than a decade ago, it took two years to raise them from 1 percent to above 5 percent, with hikes at 17 consecutive meetings. In the current cycle, it has taken 18 months for a 1 percentage point increase.
The BIS’s financial results, which were also published on Sunday, showed the Swiss-based bank had made a net profit $1.124 billion over the year to March 31 and had a balance sheet worth $329 billion.
originally posted by: lordcomac
and the tools I'll need to develop it
some turbulence in financial markets will have to be negotiated along the way. [this is code for a market dip]
originally posted by: St Udio
... the Fed will also unload $40 billion per month of Stock purchases as they unwind the Quantatative Easing that also created the DOW Stock Market Bubble...
Bail-outsoccur when outside investors, such as a government, rescue a borrower by injecting money to help make debt payments. For example, U.S. taxpayers provided capital to many major U.S. banks during the 2008 economic crisis in order to help them meet their debt payments and remain in business, as opposed to being liquidated to creditors. This helped save the companies from bankruptcy, with taxpayers assuming the risks associated with their inability to repay the loans.
According to The Economist, the magazine that coined the term "bail-in", abail-in occurs when the borrower's creditors are forced to bear some of the burden by having a portion of their debt written off. For example, bondholders in Cyprus banks and depositors with more than 100,000 euros in their accounts were forced to write-off a portion of their holdings. This approach eliminates some of the risk for taxpayers by forcing other creditors to share in the pain and suffering.