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Why central banks may have to raise interest rates sharply to lower inflation

The Bank for International Settlements says, "in an unequal society, income is concentrated in the hands of a few, whose consumption is high and largely insensitive to interest rate". That could limit the effectiveness of monetary policy 

June 22, 2022 / 08:38 AM IST
Why central banks may have to raise interest rates sharply to lower inflation

File image of a shopper holding groceries while waiting to checkout inside a grocery store in San Francisco, California, US

The markets seem to be worried that too much monetary tightening by the US Fed would tip the US economy into a recession. And since what happens in US markets reverberates around global markets, via the US dollar and fund flows, the probability of the US Fed overshooting is one that should concern all investors. But surely the central bank knows what it is doing. Some economists believe the Fed often makes mistakes and point to the excesses built up...

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