On their quest to quell inflation by hiking interests, central banks and governments forgot the importance of maintaining stable currencies, said Steve Forbes, chair of Forbes Media.

The British pound shed 4% to an all-time low of $1.0382 on Monday in Asia, following last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.

Currencies are weakening against the U.S. dollar as interest rates in the United States continue to surge. The Chinese yuan and Japanese yen also plunged heavily as the two economies held on to accommodative monetary policies more than the U.S.  

“No central banker today — hardly any — talks about stable currencies. It’s about depressing the economy to fight inflation,” Forbes said at the Forbes Global CEO Conference in Singapore on Monday. 

He added many economists and policymakers have stuck to a standard “dogma” or mindset of targeting inflation by hiking interest rates and failed to look beyond that, such as by taking steps to shore up currencies.  

Forbes cited an example favorably from the 1980s: After then-Fed Chair Paul Volcker reined in inflation with a dramatic interest rate hike of more than 20%, U.S. President Ronald Reagan stabilized the economy and increased production by cutting taxes and introducing deregulation.

The Reagan administration also coordinated global efforts to sell dollars and buy up other currencies. 

“Today, unfortunately, not only is the Biden administration putting up obstacles to deal with supply-side problems, but also the Federal Reserve and other central banks think you have to depress the economy to bring inflation down,” he said disputing the idea that a recession is the only solution to combating inflation. 

“They do it by artificially raising interest rates. So they have fewer people employed ... that is not the real cure,” he said.

“The real cure is to stabilize the currency. You don’t have to make people poor to conquer inflation.”

Currency imbalances is bad news for economies. A soaring U.S. dollar means more expensive exports, while weaker currencies could mean issues like lower foreign exchange reserves. 

“Gold holds its intrinsic value better than anything else on earth … gold is not perfect as a stable value but it is better than anything we have found in over 4,000 years,” he said. 

“With unstable currencies you get less productive long-term investments, which is key to economic growth.”

Meanwhile, HSBC’s global chief economist, Janet Henry, said at a panel at the same conference that she would not be surprised if sterling continued to fall below the low of $1.0382 on Monday, but she did not expect it to stay at those levels. 

“I don’t think there will be currency intervention on the sterling … but the onus is now on the central bank to do more to tighten policies to stabilize the situation,” Henry said. 

“I think unless we get severe financial distress they [bank] will wait until the next meeting to show decisive action to raise rates aggressively in the next couple of meetings.”