After the interest-rate cuts and hectic central-bank bond-buying of early 2020, investors came to believe that central-bank stimulus would pretty much last forever. Today, however, as investors come to terms with the end of the era of free money , financial markets are in spasms. Markets now expect interest rates to increase four times in 2022 as the United States Federal Reserve fights the inflation that has lifted growth in the consumer-price index to 7 per cent , a level barely imaginable a year ago. On January 26 the Fed confirmed that it would end its bond-buying programme and signalled that it would probably raise rates soon. READ MORE: S&P/NZX50 Index loses another 1.6 per cent, slips below 12,000 The reasons behind the current stockmarket turmoil Reserve Bank may be forced to ‘keep hiking until something breaks’ This hawkish shift is the most important among many to have taken place in the world's central banks in recent months. But it has only recently begun to bite in asset markets. After reaching a vertiginous high of nearly 40 times earnings at the turn of the year, the S&P 500 index of stocks has fallen by 9 per cent in January (markets… Read full this story
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