With inflation spiking and governments' debt ratios soaring, one might conclude that a financial crisis is imminent. But, with many governments' debts being inflated away and real interest rates still negative, that scenario remains unlikely today.
BRUSSELS – Central banks are busy tightening monetary policy as quickly as they can. Even the usually careful European Central Bank just increased its key interest rate by an unprecedented 75 basis points, matching an earlier move by the US Federal Reserve. Financial markets have reacted to these actions as one would expect, with stock markets and long-term-bond prices both tumbling. But none of this means that a financial crisis is imminent.
BRUSSELS – Central banks are busy tightening monetary policy as quickly as they can. Even the usually careful European Central Bank just increased its key interest rate by an unprecedented 75 basis points, matching an earlier move by the US Federal Reserve. Financial markets have reacted to these actions as one would expect, with stock markets and long-term-bond prices both tumbling. But none of this means that a financial crisis is imminent.