Is it possible for central banks to get inflation under control without causing a recession?
Though people were complaining about inflation a few months ago, they've now started complaining about interest rates.
They simultaneously want inflation to stop, without the rising interest rates that will cause a recession.
Is it even possible to do this?
One tool central banks have is reversing Quantitative Easing.
In theory it should be possible to hold interest rates where they are, and do aggressive Quantitative Tightening instead.
In practice the financial markets hate Quantitative Tightening. It drains liquidity from the system and causes asset prices to fall.
So the markets have been throwing tantrums.
Is it a coincidence that the attack on the pound occured the week before the Bank of England was about to go from mild QT (allowing maturing assets to run off the books) to aggressive QT (actively selling assets)?
The tantrum worked - the Bank of England delayed the start of aggressive QT.
So central banks are back to their other tool: raising interest rates.
No, it is not possible...
because the CBs do not want that.
This whole thing was engineered.
The inflation is not due to too much money printing, it is due to a supply chain shortage.
Not enough goods / food.
Not enough oil.
These are the things where inflation is seen.
And, what we aren't look at is stocks, bonds and realestate is all in deflation.
CBs cannot have deflation.
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