The US Federal Reserve has come up with an unprecedented depth of rate cut and that too, much before its slated review. Globally central banks seem to go by dated text-book monetary prescriptions than insights gathered from financial crises. It has been flitting from concerns over inflation to liquidity flooding and occasionally to exchange-value correction. Post-(Donald) Trump disruption and now Covid-19, monetary policy worldwide pivoted at the start of the year from tightening to easing. The pace of rate cuts accelerated during 2018 as the US tried to reshape the global trading system that threatened economic growth, disrupting cross-border supply chains, business confidence and investment.
In contrast to 2018, when the central banks raised interest rates, the benchmark interest rates were cut 67 times in the third quarter of 2019 world over. What use of monetary interventions that induce unsteady flow of funds among economies when the flow of global trade itself is caught up in a vortex of uncertain spin and depth?
R Narayanan Navi, Mumbai
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