|
Asta Pravilonytė
Every manager can call him or herself a good strategist if he or she only works within an environment that is favourable; however, it is only in times of stress that one truly learns what one's capabilities are! |
|
|
|
What is the right interest rate for the low growth and high inflation regions? This is the main issue to consider for the central banks in Europe and US. Moreover, is the increased nominal interest rate an appropriate measure to manage inflation when financial stability is rebuilt by the increased money supply?
According to the Federal Reserve Board’s and Federal Open Market Committee’s press release in April 27, the FOMC decided to maintain the Federal Fund Target Rate at 0.25 %. Similarly, according to the press conference held in May 5, the Governing Council of the ECB agreed to keep the key ECB interest rates at 1.25 % after the 25-basis point increase on 7 April 2011. The governors of central banks promised to monitor the inflation and commodities' prices closely and respond to arisen inflationary pressure respectively.
Considering the current US’s and Europe’s economic outlook somebody may interpret that a slight, 1-3 % annual GDP growth of the region is a signal of the modest recovery while determined nominal interest rates are lower than the growth of GDP. However, from my point of view, if the projected growth of the capital flows of the state were discounted by the adjusted rate for inflation, it might appear that the current costs of output exceed the future benefits and the net present value is negative.
|
Sign in
to receive articles:
| |
