Central banks should abandon floor systems – BIS’s Borio
Abundant reserves are causing distortions and could hamper policy-making, economist says
Central banks should stop using floor systems to set policy, as it can cause distortions in key financial markets, Claudio Borio argues.
Borio, head of the monetary and economic department at the Bank for International Settlements, says floor systems have widespread impacts on the financial sector and economy. They can undermine a central bank’s interest rate control, influence the size and functions of its balance sheet, distort money and capital markets.
In the working paper, he urges
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