The head of the Bank of International Settlements, Agustin Carstens, spoke to Bloomberg earlier
- The world economy has certainly slowed down markedly
- There are some models that show probability of a recession has increased
- But it is still far from being something sure
- The elephant in the room is trade policy
- Central banks have to be very skillful in working out the adequate balance
- If we go too far in terms of negative rates, threats to financial stability in the future might start appearing
He points to trade policy as being one of the main reasons pushing central banks into a corner of desperation lately. Arguing that "if we had a different trade policy, central banks would not be pushed so much toward accommodative monetary policy and therefore monetary policy will need to deplete its policy space".
That's a fair point but it isn't the reality that we are living in right now. The fact is that the trade war is here to stay and will carry on for an extended period of time and that is something that markets and central banks have to get used to in the current landscape.
