Against these difficult dynamics, the major economies are locked into what Larry Summers once termed “the balance of financial terror.” 5 Reserves are highly concentrated by holder (the top five countries hold roughly 50 per cent) and currency (two-thirds are in U.S. dollars). Reserve accumulators trade exchange rate stability for exposure to large capital losses if the dollar were to depreciate.
The Bank recognizes that the year-on-year rate of change in the CPI is likely to be revised downward with the base-year change scheduled this month. Taking the scheduled revision also into consideration, it appears that it will still take some time to achieve price stability.