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Inflation: Looking beyond forecasts

It may be worthwhile to pay attention to what the markets are telling us, as they did during the pandemic, rather than rely on consensus forecasts

Topics
Inflation | US Inflation | Federal Reserve

Debashis Basu 

Debashis Basu

In my previous piece last fortnight, I had said “the probability that will come down on its own is low. This means if the central banks act harshly now, the markets will crash and then rally. If they are hesitant, the pain will be prolonged”. Well, on June 10, it was announced that US inflation, at 8.6 per cent in May, was at a 40-year high, causing markets in the US as well as India to crash. On June 15, the US hiked the interest rate by as much as 75 basis points at one go but the hike did not generate the required confidence that in the US would be easily tamed. The markets continued to decline. Investors are perhaps finally beginning to realise that this turbulent phase may be quite prolonged.

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First Published: Sun, June 19 2022. 22:40 IST
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