Community!
As sovereign debt raises worldwide even amid rising inflation, I wonder why I've never seem some action in the sense of raising compulsory deposit rates at the bank to shrink lending and cool down the economy. The inverse happened when the rates were low, mostly because the cutting rates lost its power to stimulate the economy.
As the way I see things, this insistence in raising rates first put more unnecessary pressure on Govt Treasuries, as some of them will feel immediately the raises in interest paid as short-term bonds grow in proportion on countries debt and interests eat more and more fiscal budgets. This is worse in developing countries with already high rates, like Brazil.
If they raise the requeriments, banks would have to pay better rates to attract deposits and would assume a good part in losses before the Treasure had to rise the offered rates at bonds auctions. If somebody can explain or point the errors in my reasoning, if there's some, I would appreciate.
