The Telegraph, February 6 2022, Roger Bootle
Last week it seemed as though the penny had finally dropped with the world’s leading central banks.
Not only did the Bank of England raise interest rates again, but the European Central Bank made hawkish noises too, implying that rates in the eurozone might rise before the end of the year. And the previous week the US Federal Reserve warned about coming interest rate rises.
But these banks have turned hawkish late in the day and will now have to play catch-up. In my view, they and the financial markets, as well as most households and businesses, still do not realise how far rates may have to rise.
What happens to wage inflation will be key.
Here in the UK, there is currently a good deal of misunderstanding about what is happening. There are two related but different phenomena at work.
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