Economics
Central Bank Risk Tool Gets IMF Endorsement Amid Easy Money
- Lending limits on consumers, banks are proving effective: IMF
- Policy makers could use substitute for interest-rate tweaks
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In a world of persistently low inflation and slowing economic growth, central banks are finding a useful instrument in their toolboxes to curb financial risk.
Macroprudential measures -- such as limiting who gets a mortgage and adjusting banks’ reserve requirements -- have gained traction with central banks since the global financial crisis, and are proving effective. The targeted tools give policy makers room to hold off from cutting interest rates and fueling risky borrowing.