New inflation surge places central banks in a bind | Business

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It has been proven time and again that hiking interest rates prematurely, or excessively, can cause markets to lose ground. Markets expert, Maarten Mittner, writes about how central banks are finding it more difficult to combat inflation.

It has been proven time and again that hiking interest rates prematurely, or excessively, can cause markets to lose ground. When central banks turn hawkish, a finely balanced approach is what is needed. But often things do not turn out as predicted.

A renewed surge in inflation has caused jitters in markets as it coincides with central banks signalling an end to easy money policies and a commitment to hike interest rates next year. Rising inflation is part of the reason. But up to now, markets have believed the central bank mantra that higher inflation is the result of recovering economies and would only be transitory. Therefore, central banks will not increase rates should inflation moderately rise above average levels of 2%.Get 14 days free to read all our investigative and in-depth journalism. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed.

 

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