OREANDA-NEWS. One of the most prominent questions concerning the global economy today is whether monetary policy is approaching the limit of its effectiveness. The problem with the debate is that it has focused solely on the effectiveness of policies, without considering the need for prudence says Fitch Ratings in its latest Global Perspectives commentary.

Some of the proposals being fielded call for central banks to stray further into uncharted territory, expanding and extending their deviation from careful balance-sheet management. This could inflict reputational damage that may be difficult to rectify, with real financial and economic consequences.

Only institutions that are perceived as financially viable can expect their liabilities to be held by others as assets; central banks are no exception.