Central banks

The steepest rate-hiking program in history has largely done its job, but softening inflation may not translate to an immediate pivot on official rates as cautious central banks seek a comfortable buffer, says Neuberger Berman.

While interest rate hikes can be painful, they are crucial tools in the fight against inflation, Integral Private Wealth’s David Simon writes. Anyone in doubt should consider the Zimbabwean hyperinflation crisis of the late 2000s and the perils of short-term fixes.

With the Reserve Bank of Australia opting for a surprise 11th rate hike, Ruffer’s Duncan MacInnes looks at the impossible choice central banks around the world are facing: let inflation gather steam, or act and risk a financial system calamity.

Negative-yielding debt topped US$18 trillion at its height in late 2020, representing a quarter of global bonds outstanding at the time. With the stock of negative-yielding bonds now yielding in the positive, owners of the debt face ugly marked-to-market losses – but counter-intuitively, there were investors willing to buy them.

Green shoots of relief from central banks will take some time to filter into the economy due to a confluence of factors according to Sage Capital.

The idea of a soft landing for US rate increases will be music to the ears of investors and central banks.

Following the reopening of global markets post-Covid, there was a sudden change in macro-economic conditions caused by massive stimulus spending and supply constraints. Central bankers were caught asleep at the wheel, but are now starting to talk tough.

Following the re-opening of global markets post-Covid, there was a sudden change in macro-economic conditions caused by massive stimulus spending and supply constraints. Central bankers were caught asleep at the wheel, while inflation was surging in the background.

The Reserve Bank of Australia (RBA) increased interest rates on Tuesday by another 50 basis points, bringing the cash rate to 1.35 per cent as it attempts to rein in soaring inflation.

As we say goodbye to a volatile financial year, most investors are glad it’s over and can’t wait to say hello to FY23. Markets will be hoping that this new financial year will bring about calmer trading conditions with fewer geopolitical tensions and no devastating pandemics.