An Inevitable Monetary Policy Mistake

Are Central Banks playing politics with monetary policy. Many independent economists argue that interest rate rises are coming too late.

Apr 2022

Multi-Asset

Trusting Central Banks

Central Banks appear to be tangled in their own knitting. Faced with a backdrop of:

- COVID-induced fiscal and monetary extreme expansion.

- Inflation talked down as transient, but that has now broken levels most have never experienced.

- A global economy and supply chains that open and close as cases of COVID shift both down and then back up.

And now Central Banks are expected to engineer a soft landing in the midst of the Russia-Ukraine crisis which may continue for longer than anyone expected, and negatively impact global growth more than is expected.

The big question on investors minds is whether Central Banks are applying quantitative tightening and/or hiking too late and as the economics deteriorate. Or will they listen to what the bond markets are saying and back track on rate rises and tolerate higher inflation.

The answers to these questions will have major impact on portfolios in 2022.