Have Central Banks Lost Credibility?

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Have Central Banks Lost Credibility


Source: Bloomberg, Unigestion, as of 11 November 2021.

If one considers that credibility is the most important asset for central banks, they have definitely incurred losses on this front recently. The market is becoming ever more sceptical about the transitory nature of the current inflation shock, and the longer policymakers take to acknowledge the genie is already out of the bottle, the longer price pressures will stay with us without efficient counter measures. Even though the initial market reaction has been positive, as pushing forward the moment to tighten monetary conditions is good news for the investment community, their perceived complacency on inflation is negative over a slightly longer time horizon.

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