Economics: Pulling the ripcord
Persistent inflation pressures.
Inflation data have remained problematic, continuing to broaden and surprising to the upside for far longer than generally expected. Yet, the reasons for this remain unclear, with many of the touted explanations not appearing to fit the facts all that well.
Fearing regime change.
This uncertainty is a source of concern for central bankers. They fear getting trapped in a regime in which high inflation becomes self-perpetuating. This helps explain their increased urgency to hike rates and their apparent disregard for rising recession risks.
A hesitant policy pivot.
Policy rates are likely to rise until evidence of a material slowdown, if not recession, comes through. We appear to be getting closer to that point. But central banks might prove reluctant to ease until there are clear signs that inflation is in retreat.