'Central banks can't afford another crisis'

Central banks have Virtually no wiggle room More to make mistakes, now that they are trying to find a way out of the stimulus policies of the past ten years. Oystein Olsen, governor of the Norwegian central bank and also manager of Norway's $1 trillion sovereign wealth fund, said this during his annual speech in Oslo.

"Unexpected things can always happen and the warning I want to issue here is that it would be a particularly bad time if we were to experience a major correction now. This is due to the limited room for manoeuvre in fiscal policy and the fact that interest rates are still low. It is a concern if there is a correction before monetary policy is normalized."

Central banks need to raise interest rates

Like the Federal Reserve and other central banks, Norway is also planning to raise interest rates this year. That would be Norway's first interest rate hike in seven years. However, there is no confidence that this period will be uneventful, as the volatility at the beginning of this month has shown that the global economy is still very fragile.

According to Olsen, the growth of the global economy will allow us to absorb a small correction, but it remains to be seen how people will react to a larger decline in the financial markets. In that case, Norway has a $1 trillion sovereign wealth fund to fall back on, but in many other countries there is no such buffer. In fact, in many countries, public and private debt has only increased since the outbreak of the financial crisis. This makes it difficult for central banks to raise interest rates.

If another crisis breaks out, central banks will have almost no room left to cut interest rates further. If they have to lower interest rates by a few percent again, that would mean that interest rates would become negative. This can be a flight to tangible possessions such as gold and silver trigger.