Coordinated cuts

This week has been very active for central banks. Not only the Fed cut rates, but 6 central banks in total decided to lower oficial rates as you can see in the table below. What’s interesting though is that after years of trying to keep inflation low, they’re now lowering rates when the trend for inflation points to higher prices. Half of the centrals banks shown in the table below have higher inflation than its prior reading. Perhaps they don’t want their respective currencies to appreciate versus the dollar, or perhaps they simply want to dilute their debt trough repression, but only Japan, Taiwan and Brazil have a hawkish policy in place. The rest are favoring liquidity in their respective systems. Unless deflationary pressures come in, we’re going to see higher prices globally. Historically, central banks don’t anticipate crisis, they’re more likely to create them. This coordinated move may have other motives, and it may have to do with the levels of debt and their currencies.

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