The writer is chief economic strategist at Netwealth
There needs to be a prolonged period of positive real interest rates in western economies. That is, policy rates will need to remain higher than inflation for some time. Not now, but once we see where core inflation settles. Markets will need to factor this in fully.
The end of cheap money is the dominant issue, driven by the need to restore anti-inflationary credibility to policy. Two aspects stand out. One is where rates will peak and whether central banks have done enough to curb inflation.
Tightening through higher policy rates could end soon. Globally, headline inflationary pressures are easing. Freight rates and oil prices are low. The UN’s measure of food prices is 22.1 per cent below its March 2022 all-time high.
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