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Are central banks one step away from beating inflation?

Are central banks one step away from beating inflation?

He Bank for International Settlements (BIS) showed “cautious optimism” in its latest quarterly report that central banks are close to victory in their fight to control the economy. inflation world.

“Central banks have taken decisive measures to prevent the inflation is consolidated,” he told the press Claudio Borio, head of the Monetary and Economic Department of the BIS, an organization known as the central bank of central bankers for its regular closed-door meetings with the main officials responsible for global monetary policy. “At the same time, the economic activity has proven remarkably resistant and the Finance system has held up well,” he added.

The BIS has gradually become more hopeful about the outlook. At the end of 2023, he noted that progress in the fight against inflation had been encouraging, but he stressed that central banks were not yet out of the woods.

While there was the usual caution about the persistence of risks, Borio pointed out this time how the “distance” had narrowed significantly between when markets expect interest rates to start falling again and what the big central banks They have been pointing. “The fact that financial markets have converged with the views of central banks suggests that, at least on this occasion, central banks had a better appreciation of the risks,” he said.

The effect of the AI ​​boom and the service industry

The report also analyzed the obstinacy of the inflation and what would be the neutral rates in which they are neither too lax nor too restrictive – or “r*”, in the language of economists – after the Covid-19 pandemic and as the deglobalization and the aging population They reconfigure economies.

Likewise, it concluded that inflationary pressures could become more tenacious as the service industries increased their weight in the economies, while the r* could now be higher, although calibrating it was plagued by uncertainties.

In the current context, it is such a “fuzzy indicator” that “it will be very difficult to use it in a very concrete way when driving the monetary politics“added Hyun Song Shin, head of Research at the BIS.

There was also a partial warning about skyrocketing prices. great technological valuesespecially those related to the rise of artificial intelligence.

Nvidiawhich is listed in the United States and makes the chips that power AI software, has seen its shares soar another 66% this year, after a rise of almost 240% in 2023. Goalowner of Facebook, is also up almost 140% in the last 15 months.

“Whenever there are big changes or potential changes in technology, there are these huge bursts of enthusiasm that drive the market to extreme levels. We may be seeing it again,” Borio said. However, with many other markets also rising strongly this year, investors are anticipating “a very, very soft landing” for major economies, he said.

Uruguay with inflation “where it should be”

Last week, the president of the Central Bank of Uruguay (BCU), Diego Labathighlighted that “the inflation “It is where we want it to be,” when referring to the annual data of the consumer price index (CPI) and defending the contractionary monetary policy carried out by the entity.

“We have a target of 4.5% and inflation is where we want it to be.” In turn, he highlighted that the monetary authority’s forecasts indicate that the inflation will continue in the target range in the two-year horizon. “We project that it will remain in the range for the entire period,” she explained.

Labat also referred to the latest decision of the Monetary Policy Committee (Copom)to maintain the reference rate at 9%, stating that “we understood that it was time for a pause,” after a year in which the BCU led the cut of the MPR at the regional level.

Source: Ambito

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