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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State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: +612 9240-7600 · Web: ssga.com.
Investing involves risk including the risk of loss of principal. This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information. The views expressed in this material are the views of Simon Mullumby through the period ended 18 October 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA Australia’s express written consent.
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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.
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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.
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