What to do if the transmission does not work?

Thus, with the cycle of increases in the reference rate starting in mid-2021 in which most central banks seek to cool demand, it is expected that inflation will also moderate.

Despite this, at least in the case of the largest economy in the world, the United States, some indicators that measure the state of the economy still do not show the weakness and even recession that the most pessimistic expect, on the contrary, they have retained some resilience, while inflation Still stubbornly high.

These delays from monetary policy decisions to the real economy do not mean that the transfer mechanisms are not working, but rather that the economy takes some time to absorb the decisions of central banks. It depends on the circumstances of each economy, but it can take anywhere from three months in the case of sectors with greater rate sensitivity (such as housing), and up to eight months for the rest of the sectors, although there is always the possibility that these delays extend for longer.

The time elapsed between the announcement of monetary policy and its first impact on the real economy may vary according to the strength of the transfer mechanisms themselves.

There are usually two main transmission mechanisms or channels that operate (the sin of simplification) as follows:

The first is the one that is born with monetary policy tools (interest rate, asset purchase) and is linked to financial conditions, which in turn are linked to economic stagnation, which is the last step before reaching the sources of inflation. Pressure (only those who can be affected by monetary policy; an example of those who cannot, would be increases in international prices for energy and agricultural products).

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Aileen Morales

"Beer nerd. Food fanatic. Alcohol scholar. Tv practitioner. Writer. Troublemaker. Falls down a lot."

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