Omnis Managed Portfolio Service - Monthly Update February 2022
Markets have had a turbulent start to 2022. Everyone has been paying extremely close attention to how the Federal Reserve (the ‘Fed’, which is the US central bank) may look to manage inflation by raising interest rates. Inflation continues to be elevated. Supply disruptions combined with strong demand for goods, high commodity prices and rising wages have persisted, pushing inflation far above the targets that central banks have set.
Meanwhile, the Bank of England has raised interest rates for the second consecutive month to 0.50% as inflation continues to soar in the UK, hitting a 30-year high at the end of 2021. If central banks raise interest rates too quickly and too aggressively, they risk hampering economic growth. Interest rate hikes encourage the economy to ‘cool off’ and thereby ease inflationary pressures. This means that central banks now face a balancing act between managing rising inflation and choking off economic growth.