Acting Governor of the Central Bank of Barbados, Victor Springer sounded this word of caution Tuesday while addressing the opening session of a course on open market operations, at the Grand Salle yesterday.

He suggested more active management of macroeconomics policies that would require central banks to not only strengthen their technical capacity but also improve their coordination with the various finance ministries.

"It is crucial to pursue the deepening and diversification of the financial markets to enhance the monetary policy transmission mechanism since,
as the recent global turmoil suggests, there
are still some flaws," Springer said.

On the subject of liquidity, the acting governor said open market operations were critical to controlling liquidity against the backdrop of turmoil in global markets.

Springer cautioned that liquidity problems at firms could lead to disturbances in financial markets and in the payments.

"The crisis has shown that the information about individual banks and the wider market developments is crucial for central banks to manage the risks to financial stability."

Further, he said, the liquidity in the global markets has taught central bankers the usefulness of having open market operations and other indirect policy tools at their disposal. (JW)