Monetary policymakers are under pressure, with inflation historically high and acute shortages threatening to boost price pressures further still. Accordingly, there is a risk that some central banks will start this tightening cycle at a faster pace than the usual 25bps per quarter – 50bp hikes like those last seen in the mid-90s cannot be ruled out. But even if they do, the initial pace of tightening will not set the tone for the whole cycle. There are good reasons to think that the pace would moderate before long and that the peak in rates will ultimately be lower than in previous cycles.
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