The policy inversion

With global economic policy preferences being the opposite of those seen after the 2008-09 crisis, so should be the implications

Despite headline inflation having moderated meaningfully from the peak, bond yields in the US, EU, and the UK are still near 15-year highs, likely in anticipation of a more gradual fall in inflation going forward. Mortgage rates in the US and the UK are still near peaks they hit last year. Two months back, this column had flagged the risks of monetary policy having to tighten excessively to control inflation as fiscal policy remained loose (“The tap still left open”, Business Standard, May 9, 2023). These risks are now becoming manifest: In economies where fiscal interventions were moderate, like Japan,