Globalization Has Left Central Banks Facing a World of Growing Economic Uncertainties

The macroeconomic policies of the world’s central banks are crucial for economic growth. By changing interest rates or adjusting the money supply, these banks keep inflation at low levels, thereby ensuring stable prices. That stability rests in large part on the predictability of the central banks and these institutions reacting consistently to market information. Recently, however, the data that central bankers use to set policy have become less reliable, upsetting the delicate balance of expectations and stable prices. Stephan King, the managing director of economics at HSBC, argues in “The Independent” that globalization is the culprit. Increased mobility of labor, capital and information has made the world economy more interdependent than ever before, which means that central bankers must now peer into the crystal glass and understand the future of markets and other banks across the globe. As uncertainties increase, the stability of some national economies could erode. – YaleGlobal