Macroeconomic contradictions

The main function of a central bank is to control inflation by managing the money supply and controlling rates.

Intervention rates are one of the tools central banks have when it comes to stimulating economic growth. If inflation is rising, its effect results in the loss of people's purchasing power. It also limits consumption and controls the supply of the circulating currency. But if these rates begin to adjust upwards at an accelerated rate, growth could be paralyzed.

Today, under the circumstances prevailing around the world, commercial banks have practically closed their credit window. As a result, they are only dedicated to raising funds to manage their cash flow, increase their provisions for non-performing loans, cover their expenses and be somewhat profitable.

Now, with rates almost at 0%, central banks' room for maneuver is minimal, as they do not want to fall into the scenario of negative real rates. That is, rates that subtract inflation (negative return) and having to charge commercial banks for holding our money every night; "forcing" them to continue doing treasury management and not leveraging economic growth.

On the contrary, if rates rise, those sectors that depend on bank financing will see their profits diminish due to the so-called increase in the cost of credit.