According to the Switzerland headquartered Bank for International Settlements, financial markets are now heavily dependent on the central banks. The bank is known as the bank for central bankers and it published this information in its quarterly bulletin. The report has also said that the central bankers are now over burdened with responsibility for managing the growth slowdown. This comes in the backdrop of investors bracing for the latest announcement concerning interest rates from US Federal Reserve.
The BIS comments came at the beginning of the week when both the Japanese central bank and the Federal Reserve are preparing to update markets on most recent interest policies. It is expected that the Federal Reserve will keep the rates of interest unchanged despite the concerns that largest economy in the world do need a rise in the borrowing costs. Wall Street analysts are of the opinion that there is minimal chance of a rise in interest rates when the Federal officials will hold a meeting on September 21st. According to them, the chance of hike from the present 0.5 percent rate is a meager 12 percent.
Forecasts of the rise in rates were downgraded when it was reported that annual inflation went up by 1.1 percent. This was 0.8 percent in July. According to analysts, the price rise was of minimal influence to the Federal Reserve. This is due to the fact that the inflation was caused by the shooting up of health care expenses in a 32 year record. House rents had a modest increase. Prices of consumer goods and food remained almost unchanged. If the Federal Reserve takes the decision to freeze rates, it will join the European Central Bank and Bank of England club. Both banks kept the interest rates down at their historical lows during their September meetings.
The report has outlined how the markets responded from BREXIT times. The exit vote compelled Bank of England to slash rates for the maiden time in about seven years. The rates were fixed at 0.25 percent. Claude Borio of the economic and monetary department of BIS said that through a mix of negative or near zero policy rates, forward guidance and big scale asset purchases, the central banks have tried to ease the financial conditions so that there will be a boost in the economy. There is also the requirement to push the inflation nearer to the numerical objectives.