TOL - 23rd Nov, 2023
Central banks like inflation, they’re not about to stamp it out
The RBA has been going easy in the fight to control inflation. That means more rate hikes are likely.
They couldn’t get it for over a decade, and now we have it. Are they going to stamp it out? We’re talking about inflation, and, if you recall, it wasn’t that long ago that it became a popular narrative that the whole world would follow Japan’s lead.
Covid proved to be the catalyst that sparked resurgent inflation to the point that it became a pressing issue. However, just because central banks are trying to cool inflation doesn’t mean they want to stamp it out.
“Central banks like inflation. They don’t like high inflation, but they do like controlled, steady price increases year in, year out.”
Simon Mullumby, Head of Australian Cash and Bonds at State Street Global Advisors, argues that this has meant the RBA has been tackling inflation with ‘kid gloves’. His view is that this increases the prospect of future interest rate hikes.
In this short interview, he outlines why markets react differently to central bank tightening and how floating rate notes can offer protection in a rising rate environment.
Key points
- Inflation is miles above where central banks want it and it is likely to be higher for longer.
- Central banks like inflation which is why Simon Mullumby believes they’ve been taking a gentle approach.
- Floating rate notes provide a way to generate a return that keeps pace with rising interest rates.
Learn more
Simon actively seeks to invest in interest-bearing investments of high credit quality, rather than investing in a predetermined basket of securities such as an index. For further information on the Floating Rate Fund, please visit the fund profile below.
Managed Fund
State Street Floating Rate Fund
Global Fixed Income
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Livewire is Australia’s #1 website for expert investment analysis. We work with leading investment professionals to deliver curated content that helps investors make confident and informed decisions. Safe investing and thanks for reading Livewire.
Expertise
Livewire is Australia’s #1 website for expert investment analysis. We work with leading investment professionals to deliver curated content that helps investors make confident and informed decisions. Safe investing and thanks for reading Livewire.
Expertise
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