Economics: Hawkish shift opens up new risks

Rising inflation has provoked a shift from central banks

Central banks have become noticeably more hawkish in recent weeks. The reasoning is fairly clear – they’re concerned that the recent rise in inflation could prove sticky. But could this hawkish shift turn out to be a mistake, just as it did in 2010-11?


Monetary policy could be tightened into significant headwinds

The global economy appears in better shape today. Balance sheets have been repaired and fiscal policy is loose. But central banks could end up tightening into the headwinds of weak global money supply growth and slowing Chinese construction investment.


The risks to the global economy are becoming more two-way

The risk of persistently higher inflation has dominated discussions about the global economy for much of this year. But the more that central banks respond, the more that the balance of risks will shift. This hawkish shift opens up a downside scenario.


Economics: Hawkish shift opens up new risks