investmentwatchblog.com / BY IWB ·
From Michael Covel, Editor, Vertical Trade Alert:
Recently, two of the world’s most influential central bankers sent a critical signal to investors…
Bank of England (BoE) governor Mark Carney and Federal Reserve Chair Janet Yellen both revealed their desire to let their respective economies “run hot.”
They’re going to allow inflation to go higher than usual as a trade-off for economic growth.
That means the central banks’ long-standing 2% inflation target is effectively being tossed aside.
That spells bad news for workers, savers and consumers as rising inflation reduces the purchasing power of their earned and interest income. By design you’re going to be squeezed in a vice grip.
But there’s a silver lining…
Inflation’s Winners and Losers
Central banks use short-term interest rates to control the rate of inflation.
In theory, keeping rates low increases demand for credit, helping boost economic activity and, therefore, inflation. And that’s just what Carney and Yellen are trying to do.
They would both rather be too slow in raising interest rates than too fast.