Jun 21, 2022
In this episode, Escala Partners CIO, Tracey McNaughton, explains the course correction by central banks around the world in responding to sticky inflation. Wages are coming under pressure as consumers raise their inflation expectations. Central bank credibility is on the line, the loss of which could be even more serious longer term than a correction in the market.
(0:54) – It has been another eventful couple of weeks in financial markets with plenty of central bank action and new data to digest. What was behind these big moves?
(3:50) – The inflation report did come in higher than expected, but a lot of the price pressure is coming from food and energy, both of which are being driven by forces outside of the control of the Federal Reserve.
(5:50) – Even though we have seen big falls in equities, you don’t see the Fed stepping in here and offering any support?
(7:33) – Why is central bank credibility so important?
(10:04) – Last week the Fair Work Commission announced a rise in the minimum wage. What do you think that will do to the inflation picture in Australia and the outlook for interest rates?
(11:49) – We have inflation remaining high and accelerating. Central banks becoming more aggressive and determined in fighting it. Concerns about growth are starting to rise.
(14:51) – Turning to equity markets, what does that do for earnings expectations?