The pandemic has been a constant source of disruption, not just in financial markets, but to the everyday lives of virtually everybody across the world. As we enter the third year of this public health crisis, however, there appears to be growing optimism that the months ahead could represent a return to a more “normal” environment, one in which concerns over infection ebb (thanks to increased resistance across populations brought about by vaccination and prior illness) and restrictions on activity are rolled back.
While a move toward the end stages of the pandemic and the resulting, improved, clarity over the outlook — notwithstanding the recent rise in geopolitical uncertainty — are unambiguously positive developments for the world, there are some implications of these changes that have proven less than ideal for financial markets.
The most notable is that the more sanguine expectations have resulted in a material shift in the approach to policy setting by central banks. The easing in pandemic-related risks to the outlook, combined with generally constructive macroeconomic fundamentals, has resulted in monetary policymakers eschewing their previous “abundance of caution” in favour of stepping up to address rising issues that are seen as providing longer-term risks to economic growth and price stability.
Specifically, the combination of the surprising resiliency of the consumer and business demand through the pandemic and the ongoing supply-side difficulties have resulted in persistent and broadening price pressures, with gauges of inflation worldwide perking up to multi-decade highs.
Read More.
Comments are closed.