Central bankers don't like surprises, so they tend to communicate among themselves in order to coordinate their response to every new crisis. And this week there was a wave of responses to the combination banking crisis and still high inflation. The Cause Raising interest rates from near zero to over  4.5% in a short period of time puts stress on banks' liquidity as it causes an "inverted yield curve", i.e., short-term interest rates are higher than the locked-in long-term rates. Thus banks are paying out more (on short-term deposits) than they are receiving (on long-term mortgages).   The Effect So you would think the Central Bankers would be prepared to deal with the … [Read more...]