Central banks’ policies impact demand, activity and therefore inflation, with fluctuating and sometimes long lags. This complicates central bank watchers’ analysis. Recent economic and financial data are key to their work, but do not offer a comprehensive picture. They must be supplemented with prospective analyses based on assumptions about how the economy will respond to monetary impulses.
Understanding central banks’ reaction functions
Published on May 23, 2023 in :
Fiscal and monetary policy