Reasons for this development include exchange rate stabilization, insurance against a destabilizing run on the domestic currency, or a desire to retain the ability to provide foreign currency liquidity to the domestic economy. On a global scale, these benefits have to be weighed against significant costs implied by foreign exchange accumulation.
As slack in the economy continues to be absorbed, reflationary forces will gradually build up and the traditional Phillips curve connection between inflation and the business cycle should eventually reassert itself.