New monetary frameworks involve risk trade-offs – IMF’s Adrian
Lower-for-longer rates may help to avoid deflation, but could contribute to medium-term volatility
The new monetary policy frameworks adopted by some central banks, and under discussion by others, entail medium-term financial stability trade-offs.
Tobias Adrian, director of the monetary and capital markets department of the International Monetary Fund, highlighted this risk in remarks at the Central Banking spring meeting today (March 16).
“The new strategies will require more prolonged monetary policy accommodation, and hence may amplify the global search for yield, causing leverage to
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