U.S. market’s valuation remains historically-stretched; Pandemic recovery is fading; Inflation is soaring; Central banks speed up rate hikes

Goodbye Easy Money as Central Banks Speed Up Rate Hikes…

The end of easy money is upon us.

Two years after the pandemic sent the global economy into a deep but short recession, central bankers are withdrawing their emergency support — and they’re moving faster than they or most investors had foreseen.

The U.S. Federal Reserve is preparing to raise interest rates in March, and last Friday’s jobs report fueled speculation it may need to move aggressively. The Bank of England just delivered back-to-back hikes, and some of its officials wanted to act even more forcefully. The Bank of Canada is set for liftoff next month. Even the European Central Bank may get in on the action later this year.

Rates are rising because policy makers judge that the global inflation shock now poses a bigger threat than further damage to growth from Covid-19. Some say it took them far too long to reach that conclusion. Others worry that the hawkish turn could slow recoveries without offering much relief from high prices, given that some of the surge is related to supply problems beyond the reach of monetary policy.

There are a couple of outliers among the biggest economies.

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