Home Week in Macro How Central Banks Should Tackle the Future

How Central Banks Should Tackle the Future

Stockholm (Ekonamik) – Following our coverage of the recent commitments from the central banks of France and the Netherlands, this we considered what next steps their peers could take to support a sustainable future.

We looked at how central banks, in general, can tackle the problems that will define the economy of tomorrow. While everyone was distracted with the financial scandal that has engulfed Swedbank, their economic research team quietly released a report on what central banks can do to support the fight against climate change. From economic research to macroprudential rules, a stronger focus on sustainability is completely consistent with central banks’ mandate.

The buoyant growth in green bond markets is certain to assist central banks with this task. Green bond issuance has broken new records during the first quarter of 2019. The SEK Green bond market, in particular, has already surpassed total volume for 2017 and has reached the equivalent of 59% of the total for 2018. Globally, the energy, real estate, financial and telecoms industries have been some of the highlights of the markets.

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In the USA, Federal Reserve’s decision to hold interest rates steady last week may have injected additional worries into the economy, with investors selling off bonds with short to date maturity contributing to the continued inversion of the yield curve, a possible indicator of recession in the next 9-12 months.

These market concerns were in no way by data releases from the USA, Germany and France, all of which confirmed slower economic activity. The Chicago Fed National Activity Index for the USA continued to sink further down into negative territory, while German and French inflation continued to fall to new lows.

Finally, the UK continued to drown under the chaos of Brexit. Prime Minister Theresa May’s Brexit plan was defeated for the third time on March 29, the day the UK was originally supposed to leave the European Union. MPs are working on a new round of advisory votes Monday, but there are signs Mrs May will try to pass her deal once again before the new April 12 deal.

Filipe Wallin Albuquerque
Filipe Wallin Albuquerque
Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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