Central banks are now in a more difficult position, weighing persistently high inflation on the one hand against strains in the banking sector on the other. For now, they are separating the two by raising interest rates further to tame inflation while also offering generous liquidity support to the banks. But we expect tighter credit conditions to weigh on the economy over time, which will contribute to weakness in demand and inflation and strengthen the case for a turn in the monetary policy cycle. In this Central Bank Watch, we outline the indicators that policymakers will be watching to gauge how banking strains are affecting the real economy.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services