Navigating Monetary Tightening Through Fragile Markets

Well-functioning financial markets are vital for an effective conduct of monetary policy. 2022 has seen an unprecedented global tightening of monetary policy. In parallel, stress emerged in many segments of financial markets, ranging from highly risky instruments (crypto currencies) to supposedly “safe assets” (UK gilts). Against the backdrop of global market swings, a unique set of concerns for central banks in Europe and North America has emerged.

1. Mapping fragility in the market environment

• The end of “hunt for yield”: Which markets are most vulnerable to QT and what are the systemic implications?
• Will crypto trading disappear (and will we miss it)?
• Which sectors suffer from hidden leverage & illiquidity?

2. Policy: How to extinguish the inflation virus while preserving financial stability?

• How to ensure that non-banks do not threaten vital market functioning?
• Central banks as permanent “dealers of last resort”?
• Fixing the trilemma: How to achieve price, financial and fiscal stability?
• Should some of the post-GFC regulation (e.g. for bank market making) be softened?
• Rising headwinds and the spillovers between QT and financial stability: more of the former = less of the latter in the policy mix?

A distinguished panel of senior policymakers and academics will discuss these topics following an introductory overview of the main issues.