Central banks and governments cannot stop it. In fact, they must enable it.High inflation has changed everything.
Central banks must tighten monetary policy and governments must cut spending and/or increase taxes and invest in productivity-enhancing reforms to help arrest inflation, after overstimulating economies in response to the COVID-19 pandemic.After a decade of central banks massively expanding the money supply that artificially propped up asset prices, they are now selling bonds and increasing short- and long-term interest rates.
If aggressive projected interest rate rises by the US Federal Reserve are accurate, then stocks, crypto and property prices probably have further to fall. that he planned to reallocate the $261 billion portfolio towards bonds now that they are earning higher rates of interest.An inversion of the yield curve , has foreshadowed seven of the past eight US recessions, with no false signals, according to BCA Research.
Hence, higher interest rates are required to dampen demand and keep a lid on inflation that is now tipped to hit 7 per cent.Lowe thinks the $250 billion of extra households savings accumulated during the pandemic and ongoing high savings rates will help negate the impact on spending from falling house prices.