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When Foreign Exchange Intervention Can Best Help Countries Navigate Shocks
With major central banks now cutting policy rates, the global interest rate cycle is turning. This shows how far the fight against inflation has come in many advanced economies. But with economic uncertainty still high, it also raises concerns over possible spillovers. Lower policy rates could spur capital flows as investors search for yield. And such flows can reverse sharply when adverse shocks lead to renewed tightening of financial conditions. To safeguard their economic and financial stability, our Integrated Policy Framework can help calibrate the best possible policy mix in the face of such volatility. In a ... (full story)