Inflation and interest rates: where are they heading?

Investopoly · Nov 2, 2021 · 20m

The topic of rising inflation and its potential impact on interest rates has been dominating the financial press over the past few weeks. The bond markets expect that higher inflation readings will force central banks to raise interest rates.It’s my opinion that higher inflation is likely to be temporary. And it’s also useful to remember that “markets” (and popular opinion) are not always right. Bond markets priced in higher inflation in February 2021 but eventually normalised after a few months.A quick economics lesson: why does inflation lead to higher interest rates?Inflation is a measure…