Central Banks in an era of Climate uncertainty

Our readers will not need us to tell them that we live in a time of heightened uncertainty and tension. With wars in the Middle East and Ukraine, economic hardships in much of the West due to inflation and high interest rates, and volatile and unsettled weather patterns across the globe, there is much to cause concern. For central banks trying to steer economies between the Scylla of inflation and the Charybdis of recession there are few easy answers. And if anything the questions are getting more urgent and challenging.

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The Bank pauses

Last week finally brought some rather better news for the UK economy, as the latest inflation figure came in below both the previous month’s level and the market’s expectations. The Chancellor responded with a statement that “the plan is working”, and the Bank of England paused its interest rate increases and left its key lending rate unchanged – the first time it has done so in nearly 2 years.

Those are the headlines, and without doubt it is a step in the right direction. But there are rather a large number of caveats before we can declare victory over inflation.

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