A world of shifting central bank frameworks is a riskier one for markets
capitaleconomics.substack.com
By Neil Shearing, Group Chief Economist Anticipating policy shifts by central banks has never been easy but recent developments suggest it’s about to get more difficult – with potentially big implications for asset markets. For the past couple of decades, central banks have set monetary policy in accordance with either an explicit or implicit target for inflation. The intellectual thrust of inflation targeting was to anchor inflation expectations, make policy more transparent and predictable, and minimise the discretion afforded to central banks. Inflation targeting provided a simple framework for policymakers to communicate their thinking to financial markets, and made it easier for economists and market participants to anticipate changes in interest rates. The theory was that this reduced the costs of bringing down inflation and anchoring it at low rates.
A world of shifting central bank frameworks is a riskier one for markets
A world of shifting central bank frameworks…
A world of shifting central bank frameworks is a riskier one for markets
By Neil Shearing, Group Chief Economist Anticipating policy shifts by central banks has never been easy but recent developments suggest it’s about to get more difficult – with potentially big implications for asset markets. For the past couple of decades, central banks have set monetary policy in accordance with either an explicit or implicit target for inflation. The intellectual thrust of inflation targeting was to anchor inflation expectations, make policy more transparent and predictable, and minimise the discretion afforded to central banks. Inflation targeting provided a simple framework for policymakers to communicate their thinking to financial markets, and made it easier for economists and market participants to anticipate changes in interest rates. The theory was that this reduced the costs of bringing down inflation and anchoring it at low rates.