Central banks: Higher rates can wait

Posted: June 20, 2014 in economy
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Central banks


In both Britain and America financial excesses are best countered with rules, not with interest rates

INVESTORS lulled into believing that low interest rates would last for ever got a cold dose of reality this month. First, Mark Carney, the governor of the Bank of England, told an audience in the City that rates could rise “sooner than markets currently expect”. Now America’s Federal Reserve, which like the bank has kept rates near zero for more than five years, has signalled its intention to keep them there at least until next year; but it too faces ever louder calls, including some from its own officials, to abandon that pledge (see article).
Advocates of fast action worry that rates left near zero for too long will cause inflation to accelerate in both countries. And they fear that even if prices stay quiescent, too much cheap money for too long is inflating asset bubbles: their eventual popping will create another financial crisis. These worries are not …

via Economic Crisis http://ift.tt/1pMwdK1


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