Larry Summers warns that US interest rates may need to go higher than the market is expecting to tame inflation,which will almost inevitably mean putting the world’s largest economy into recession.
With trillions of dollars flowing out of financial markets,the crisis in the UK that rocked the global economy last month might not be an aberration.
Liz Truss,who models herself on former prime minister Margaret Thatcher,confirmed the plan had been dropped on social media.
British Prime Minister Liz Truss has blamed “global” factors for the rout in the pound and spike in government borrowing rates.
The Bank of England is undertaking an abrupt U-turn in policies to avert a meltdown of the UK financial markets,and it has managed to win a brief respite.
The new PM’s determination to place ideology over economics in a desperate pursuit of unorthodox growth strategies comes with great risks.
The central bank has been forced to make the emergency intervention amid turmoil that has sent government borrowing costs soaring.
Even after central banks recognised they got their inflation calls wrong last year,they’ve continued to flub their policy guidance,roiling markets and threatening greater damage to their credibility.
The bank’s monetary policy committee voted 5-4 to boost its key rate to 0.5 per cent from 0.25 per cent,with the dissenting members arguing for a bigger increase.
Britain’s central bank surprised markets by becoming the first major central bank to raise rates,despite the economic uncertainty posed by the fast-spreading Omicron variant.
Three key central bank meetings this week - including our own RBA’s - could mark the beginning of the end of the extraordinary measures adopted in response to the pandemic.