10 May April 2022 Commentary: The Tipping Point
- Global markets have been roiled by a succession of blows in April – higher bond yields, lingering post-pandemic supply chain imbalances, a commodity price shock exaggerated by the war in Ukraine, and lockdowns across most major cities in China.
- Although markets have successfully brushed off recent shocks, stubbornly high inflation is a relatively new phenomenon – one that has not been experienced by investors, policymakers, and businesses in four decades.
- While policymakers have historically responded to shocks with additional monetary support, inflation may prevent them from doing that.
- Any additional inflation will hurt consumers at a time when policymakers cannot switch to being accommodative.
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