davies86_SérgioGarciaYourImage forECB_gopinath Sérgio Garcia/Your Image for ECB

Buffer Madness

In the wake of recent bank failures in the United States and Switzerland, there have been growing calls for banks to strengthen their capital buffers. But it is not at all clear that higher regulatory capital would have any effect on financial stability.

EDINBURGH – Speaking at this summer’s European Central Bank Forum in Portugal, Gita Gopinath, the International Monetary Fund’s first Deputy Managing Director, set out what she described as “Three Uncomfortable Truths for Monetary Policy.” But it was the speech itself that often made for awkward listening.

Gopinath’s first truth was that “inflation is taking too long to get back to target” and that “sustained high inflation makes bringing down inflation more difficult.”

You don’t say? What would we do without the IMF to supply us with such bold insights?