Debelle: central banks can benefit from lack of covered interest parity
Increase in the “basis” or deviation from CIP is not always a sign of trouble, RBA deputy says
Central bankers need not necessarily be concerned about deviations from covered interest parity (CIP), and may even have cause to welcome them, according to Reserve Bank of Australia (RBA) deputy governor Guy Debelle.
The Bank for International Settlements (BIS) has examined the growing “basis”, or departure from CIP, in many markets in recent years. The title of the BIS conference at which Debelle was speaking on May 22 – “CIP-RIP?” – reflected this idea.
CIP is the theory that trading will
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