World markets have done little since the turn of the year. Omicron was a potential fly in the ointment but fears it would lead to another wave of lockdowns have proven false. Of course, it’s only a matter of time before a new mutation arrives and so on. Whether this time next year we’ll be urged to get our 8th booster shot remains to be seen.
Inflation continues to rise everywhere. It’s a serious matter and one we have been paying increasing attention to for well over a year. Despite the soothing words of central banks, it has been obvious to anyone with an ‘O’ level in economics such organisations have been far too complacent and now, have lost control of it. In the UK, retail price inflation is currently 7.0% while in the US it is similar. Laughably, the Bank of England raised its key interest rate to 0.25% from 0.1%, its first increase in more than three years. It noted that inflationary risks required it to take ‘pre-emptive action’. Dear oh dear, there’s nothing pre-emptive about a base rate of 0.25% when inflation is 7%.
By finding every excuse in the book not to normalise borrowing costs for close to a decade, all the major monetary authorities have pretty much removed their policy options. They now either attempt to control inflation by raising rates, thus delivering recession or they prioritise the avoidance of the latter, accepting price increases will remain way above target ranges for a significant period of time. Even those without an ‘O’ level in economics should be able to guess which way they’ll jump.
