Federal Reserve Board Chairman Jerome Powell. Market reactions have delayed the normalisation of monetary policy.. There’s the secular stagnation school that says the cheap price of money reflects lack of productive investment opportunities in modern economies, even amid the acceleration of technological change.
There is also some truth in the rise of the tech economy out of the ether of the internet putting downward pressure on prices and interest rates.Digital technology also has connected up globalised supply chains like never before, discovering efficiencies and delivering cheaper goods and services to people all over the world.
But, by disrupting these supply chains, the COVID-19 virus has produced shortages that in turn is pushing up the price of goods and services. This now threatens to become built into the labour market and become ongoing, forcing central banks to call a premature halt to the ultra-cheap and plentiful money era.
Frothy equity markets made bubbly by ultra-low interest rates are colliding with the 7 per cent annual increase in US consumer prices and the Federal Reserve’s imminent tightening of monetary policy to control inflation.
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