It Ain’t Over ‘Til It’s Over
Major central banks have hiked rates despite volatility in markets. They collectively said that inflation clearly means it is too soon to conclude that the hiking cycle is over. The banking sector developments haven’t stopped the hiking, and indeed, I have noted that the idea of focusing on financial stability at the expense of inflation is a false dichotomy. Central banks are deliberately tightening financial conditions in order to slow their respective economies and thereby bring inflation down…while hopefully avoiding an unnecessarily painful recession. What the banks disruption does, however, is make it harder to
calibrate the correct degree of tightening.
Inflation is clearly the priority for central banks. On March 16, the ECB noted that it projects inflation to stay “too high for too long.” Chair Powell was similarly blunt, saying that “inflation remains […]
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