Key Points
But as activity resumed and pent-up demand burst out, the excess money caused high inflation, which has stubbornly refused to return to official targets.iStock..
In 2022, governments and central banks worldwide admitted an unpleasant realityhigh inflation was not temporary and harsh steps were required to cool down surging price pressures..
Over the past year, various central bankers including Reserve Bank of India governor Shaktikanta Das and US Federal Reserve chairman Jerome Powell have said that tackling high inflation may need interest rates being kept higher for longer..
Given that higher interest rates dampen economic growth prospects, the outlook for corporate earnings weakens, hurting stock prices. Further, with higher policy rates pushing up government bond yields, or the risk-free rate of borrowing in the economy, stock market valuations undergo corrections..
When the central bank raises interest rates to tackle inflation, the cost of funds in the banking system goes up and in turn, investors seek a higher yield from the bonds that they purchase..
You might be interested in
The great central bank interest rate policy reversal kicks off
23, Mar, 24Central banks are set to cautiously decrease interest rates to prevent inflation resurgence from low unemployment. Incremental adjustments will differ from past hikes, with expected rates higher than historic lows due to global economic shifts.
With inflation knife still hanging over central banks, will value stocks find favour on Dalal Street?
06, Oct, 23While major central banks are signalling a peaking of their rate hike cycle, there are indications that the tight monetary policy stance could persist for longer than anticipated earlier
The world’s central banks are treading cautiously into 2024. Here’s why
24, Dec, 23Some of the world’s major central banks–such as US Federal Reserve & European Central Bank–are likely to avoid drama in their last set of meetings for 2023.
Behind RBI’s repo rate pause: Slump in consumption, tepid private investment
06, Apr, 23This also assumes significance given that many global agencies have lowered India’s growth forecast for 2023-24 amid expectations of global economic slowdown and monetary tightening by other countries across the Atlantic.
Central banks 'not out of the woods' in inflation battle - BIS
04, Dec, 23Global central bank umbrella body, the BIS, eased its hardline stance on inflation on Monday, calling recent progress encouraging, but stressed that central banks were not out of the woods yet.
Global Markets: Markets mixed as tech boosts US stock futures, Europe dips
26, Apr, 23Deposit flight from U.S. banks has prompted investors to dial down profit expectations for the global banking sector, with banks under pressure to raise interest rates on savings accounts to keep hold of customers' money.
Global central banks keep up inflation fight in March
03, Apr, 23The pace of interest rate hikes by major developed and emerging market central banks continued at a healthy clip in March though the scale of rises tapered off somewhat as turmoil in the banking sector clouded the outlook for global growth.
Global stock markets advance as anxiety about banking crisis fade
29, Mar, 23In US markets, the S&P 500 rises 1.4%. The Dow Jones Industrial Average gains 1% and the Nasdaq Composite jumps 1.8%
DM central banks still hawkish, but EMs set to lead global rate cutting cycle
29, Jun, 23EMs have managed to tame the inflation beast to a considerable extent. However, there are some downside risks which can revive inflationary pressures