The public expression of government’s bewilderment and disappointment at monetary tightening in the world’s largest safe-haven economy, again at a time of rising inflation and fiscal deficit, has raised in minds of investors scenarios under which its reserve currency status cannot anymore be taken for granted (A debate about central-bank independence is overdue, The Economist, Oct 20, 2018).
In response to changes in economic and financial circumstances and foreign exchange flows both at home and abroad, management of the banking sector liquidity has become an important part in the PBC’s monetary policy conduct.