The US Federal Reserve Board is pulling back on its major programme of support for the US economy. The Bank of England did not increase interest rates at its meeting on Thursday but is expected to move soon. The European Central Bank is holding out – trying to persuade investors that it will not increase its key interest rate next year, despite soaring inflation.
As economies bounce back following the removal of restrictions, central banks are confronted with a big conundrum – can they move policy, including interest rates, back to something which might be considered “normal”, without damaging economic recovery or leading to a big collapse in markets? The answer to this is one of the fundamental economic questions now facing – with big implications for borrowers, savers, investors and governments.