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

In my previous piece last fortnight, I had said “the probability that inflation 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 Federal Reserve hiked the interest rate by as much as 75 basis points at one go but