In the last couple of years we have seen interest rates hiked, financial conditions tightened to a point that economists and market participants started talking of a potential recession. More recently, we have seen companies tighten their belts and going through rounds of layoffs. On the side of the consumers, they have started to add more debt to their balance sheets, delinquencies are rising and cash balances are starting to dwindle. More recently, a number of countries are going through slowdowns. In spite of this an environment of gloom slowly setting in, the central banks have refused to pivot to a dovish stance - the reason being - there is a fear that inflation might come back.
In this context, there is an obvious question to be answered - why do central bankers fear inflation so much?
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Please note this is not an investment advice. Your investment philosophy shall be based on your risk profile and financial goals. Please seek investment advice from your own investment advisor. This article/podcast has been produced only with the intension of sharing observations from research.
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