In terms of its investments, CBSI strategically invested portions of the foreign reserves in secure asset portfolios overseas to generate income and sustain the reserves. Improved financial market conditions and favourable deposit rates, particularly in the United States contributed to the surge in interest income to $ million from $ million in 2017.
In this case, a central bank may have an incentive to deviate from the socially optimal rate of inflation ex post.18 The first line of defence against financial imbalances should therefore be macroprudential policies. They allow for more targeted interventions, too.