Economics
Government Debts May Hold Monetary Policy Hostage, BIS Warns
- Institution’s report says that fiscal dominance is a key risk
- Even a U-shaped economic recovery may be out of reach
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Central banks mustn’t get strong-armed into keeping interest rates unduly low as they splurge on bonds to help governments finance crisis spending, the Bank for International Settlements warned.
The issue has come to the fore amid the huge response to the fallout from the coronavirus. A large part of that has involved massive bond purchases to help governments fund support for their economies, which the BIS said has “blurred” the fine line between monetary and fiscal policy.