A Glance on the Monetary Politics from the Sustainability Perspective

Abstract

A difficult moment for wide-ranging monetary policy, hit by the accusation of having caused the looming global recession with the rise in rates. But is it really like that? That is, would a more accommodating monetary policy have saved the economy to all? Probably a poorly posed question, because it is difficult to agree with those who want to blame the policies of the main banks for an economy that is taking a turn for the worse. Meanwhile, it must be underlined that international price inflation cannot be cured by manipulating interest rates. Yet, the main central banks have ridden (on average) for ten consecutive small jumps. How can we now explain the interest rate shock to the real economy if they have almost no effect on inflation due to rising international prices? As if to say that the choice was to cut rising prices through the invoked recession. But this hypothesis also does not seem to hold up because the increase in interest rates does not cut inflation only because of an expected recession. Yet, if central banks around the world insist on this growing tone, they must have their good reasons. We certainly find a good reason, but it has nothing to do with international price inflation. In fact, the decision to repeatedly increase interest rates, which were hovering around zero was sacrosanct. It has finally put a stop to cheap credit, which in turn encourages speculation on the prices of oil and rare metals. The rhythmic increase in rates when stock market pressure has dropped is obviously less clear. The answer seems to be that the Central Banks do not change their model after the victory over inflation achieved by Volcker’s FED, which increased rates beyond the inflation rate at the beginning of the 1980s. With the exceptional result of bringing inflation under control and a record economic situation in the USA. But those were various times and another standard of inflation.