Tighter Monetary Conditions Ahead

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Tighter Monetary Conditions Ahead

Source: Bloomberg, Unigestion, as of 13.10.2021

Central banks are shifting away from ultra-loose monetary policies. Large divergences can be observed in this transition phase, but the path ahead is toward tapering and tightening of monetary conditions globally. The surge in prices is challenging the patient stance of policy makers, who should have been careful what they wished for: higher inflation. The rhetoric around this issue has evolved and comments about the “transitory” nature of the shock are appearing less in central bank statements. Tapering (conditional on a full post-pandemic recovery) seems granted, but tightening (traditionally implemented to cool overheating macro factors) could come into play faster than initially anticipated. Considering that ultra-accommodative monetary support has been a key factor for the performance of financial markets since the Covid crisis, the removal of such support obviously does not bode well over the medium term.

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