INTHEBLACK April 2022 - Magazine - Page 30
F E AT U R E
// M O N E TA RY P O L I C Y
CLICK HERE
TO LISTEN
to a
CPA Australia
podcast on
central bank
digital currencies
Below: A supermarket in New
York, where the price of consumer
goods has been rising steadily. At
present, Americans are facing the
highest inflation rate in 40 years.
“All of which is showing up in today’s
problems and spikes in, particularly, goods price
inflation.”
Oliver says that, while central banks are
“heading towards the exits from ultra-easy
money”, with some moving faster than others,
we are a long way from the sort of tight
monetary policy that brings economic cycles
and bull markets to an end.
“Some central banks have already started to
raise rates, but those that have seen inflation
below target in the post-GFC [global financial
crisis] period are lagging, as they are wary
of jumping at shadows and ending up with
inflation back below target again,” he says.
These include the US Federal Reserve Bank,
Reserve Bank of Australia, Reserve Bank of
New Zealand, European Central Bank and the
Bank of Japan.
Oliver adds, however, that although many
central banks have already slowed their bond
buying programs, “tapering” is not the same as
tightening monetary policy, because cash is still
being pumped into economies, just at a slower
rate.
THE NEED FOR CONTINUED SUPPORT
The Organisation for Economic Co-operation
and Development (OECD) has warned
that macroeconomic policies need to remain
30 ITB April 2022
Above: The Federal Reserve
building in Washington, D.C.
The Federal Reserve cut its
benchmark interest rate by
three-quarters of a
percentage point after two
days of tumult in international
markets due to fear of a
recession in the US.
“WHEN INFLATION
RISES TO THE POINT
OF BEING DANGEROUS,
AND THE GOVERNMENT
SUPPORT WILL BE
WITHDRAWN, THEN
BUSINESSES WILL
COLLAPSE, AND WITH
IT THERE WILL BE
DAMAGES TO THE
CONNECTED
BUSINESSES.”
DR CARMELO FERLITO, CENTER FOR
MARKET EDUCATION
supportive to ensure a “complete and durable”
global recovery in a report titled Keeping the
Recovery on Track.
“Monetary policy is still very accommodative
in the major advanced economies, as
appropriate, until there are clear signs of
durable progress towards medium-term policy
objectives,” the report says.
“Key steps towards eventual normalisation
should be sequential, starting with removal of
emergency measures to ensure well-functioning
financial markets, as has already begun, an
eventual stabilisation of central bank balance
sheets (by only reinvesting the proceeds from
maturing assets), and subsequently increases in
policy interest rates.
“Such steps should be well communicated and
state-dependent, guided by financial conditions,
sustained improvements in labour markets, signs
of durable inflation pressures and the support
being provided by fiscal policy.”