“Debt trap” may paralyze central banks with fear — BIS

Claudio Borio, the head of the monetary and economic department at the Bank for International Settlements, said it may be time for central banks to focus less on inflation and more on financial stability. (Reuters)
Updated 22 September 2017
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“Debt trap” may paralyze central banks with fear — BIS

LONDON: Central banks are in danger of falling into a “debt trap” where they can’t take needed action for fear of triggering defaults and economic turmoil, a senior Bank for International Settlements (BIS) official said on Friday.
In a speech in London, Claudio Borio, the head of the monetary and economic department at the central bank umbrella group, said it may be time for central banks to focus less on inflation and more on financial stability.
Low interest rates are encouraging record amounts of borrowing — as is the asset-buying stimulus employed by many central banks seeking to lift inflation.
But such policy in turn makes central banks more nervous about raising interest rates in case it sends their borrowers to the wall and causes a slump in their economies — known in economic textbooks as a debt trap.
“At a minimum, this suggests lengthening the horizon over which it would be desirable to bring inflation back toward target,” for central banks, he said.
“It would be desirable to use the additional room for maneuver to address the financial cycle more systematically.”
“This could improve overall macroeconomic performance and reduce the risk of a ‘debt trap.. A trap could arise if policy ran out of ammunition, and it became harder to raise interest rates,” Borio said.
He added that his remarks had been intentionally provocative.
“We may need to adjust monetary policy frameworks,” he said, highlighting “the desirability of greater tolerance for deviations of inflation from point targets while putting more weight on financial stability.”
Despite all the stimulus from loose monetary policy, inflation has remained stubbornly low in many places.
Borio said economists should not overestimate the ability of central banks to fine-tune inflation, especially in the current environment where new technologies, working practices and globalization are limiting the impact.


Qatar Airways confirms ‘substantial’ annual loss, blames row with regional neighbors

Updated 25 April 2018
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Qatar Airways confirms ‘substantial’ annual loss, blames row with regional neighbors

ANTALYA, Turkey: Qatar Airways made a “substantial” loss in its last financial year because of a regional dispute that has banned the airline from four Arab countries, its chief executive said on Wednesday without revealing the extent of the losses.
Qatar Airways has been blocked from flying to 18 cities in Saudi Arabia, the United Arab Emirates, Bahrain and Egypt since June when those countries cut ties with Qatar, accusing it of supporting terrorism. Doha denies the charges.
“We have increased our operating costs. We had to also take a hit on revenues so we don’t think that our results for the last financial year will be very good,” Chief Executive Akbar Al-Baker told reporters at the Eurasia Airshow in Antalya, Turkey.
“I don’t want to say the size of the loss but it was substantial.”
Other parts of the business were profitable though that was not enough to make up for the airline loss, Baker said.
Qatar Airways has several subsidiaries including airport ground handling services and catering units.
The airline had warned of the loss for several months.
The state-owned airline will need another eight weeks to finalize its books and make adjustments before it announces its financial results for the year to March 31, Baker said.
Qatar Airways made 1.97 billion Qatari riyals ($541 million) profit in its previous fiscal year.
Neighboring Saudi Arabia and the UAE were popular routes for Qatar Airways, which has also been banned from the airspace of the four boycotting states.