“It would be an error”: Hiking rates won’t solve supply-side disruptions | Ausbiz

It would be a policy error in the making. That’s the opinion of Oreana Financial Services’ Isaac Poole when it comes to central banks contemplating hiking rates to combat stronger inflationary pressures, suggesting tighter policy won’t solve the issue driving price pressures: supply-side disruptions. He says hiking now will be far more detrimental than beneficial, suggesting the Bank of England, Federal Reserve and other central banks contemplating pre-emptive should be patient when it comes to removing the monetary punchbowl. On the Fed, Isaac says the market has got way too excited about higher rates next year, noting it took nearly three years between tapering and tightening during the last economic cycle. He thinks there’ll be no increase to the Fed funds rate until 2023 at the earliest, far later than the current market pricing. Should he be correct, Isaac believes this will see real yields rise sharply next year as nominal benchmark yields climb back above 2%. That’s an outcome that will influence asset valuations across the world. Along with the interest rate outlook in the United States, he discusses the policy outlook for the ECB, including the difficulty in keeping all member states satisfied given stark economic and inflationary trends across the continent. (Source: Ausbiz) Click here to watch the interview.

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