Consumer prices are rising in many countries worldwide. Interest rates may increase if this trend continues. Critically discuss how the current macro

 Consumer prices are rising in many countries worldwide. Interest rates may increase if this trend continues. Critically discuss how the current macroeconomic environment may lead to a rise in interest rates, the potential implications for the balance sheet of banks and for the entire banking system.  

Preparation Notes:  

– Interest rate risk and monetary policy normalisation in the euro area.  

https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2496~42f83d43aa.en.pdf 

or the published version here:  

https://www.sciencedirect.com/science/article/abs/pii/S0261560622000274 

– The role of financial stability considerations in monetary policy and the interaction with macroprudential policy in the euro area  https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op272~dd8168a8cc.en.pdf 

– Relevant documents can be found on the Bank for International Settlement website. ( https://www.bis.org)  

– Additional references for interest rate risk:  

Cornett M., and Saunders A., (2018). Financial institutions management: a risk management approach. McGraw-Hill Education  

Sironi, A., and Resti, A. (2007). Risk management and shareholders' value in banking: from risk measurement models to capital allocation policies (Vol. 417). John Wiley & Sons

Note:  Not more than 2000 words