- Central banks face a difficult trade-off between financial instability and high inflation.
- Increasing interest rates may help banks, but it would stimulate the economy and make inflation worse.
- New rules introduced after the 2007-09 financial crisis have not worked, obliging central banks to perform an excruciating balancing act.
- Regulators' inability to resolve banks in an orderly fashion has created uncertainty and confusion.
- Central banks must fix the regulatory regime to remain free to fight inflation.
The Economist — World — Central Banks — Finance — Economy — Monetary Policy
Central banks face an excruciating trade-off
Central banks face an excruciating balancing act between financial instability and high inflation. New regulations have not worked, so central banks must fix the regulatory regime to remain free to fight inflation.