Central banks around the world are trying to tame inflation by increasing interest rates. What are the likely implications for the global economy, financial markets and investment returns?
Why are central banks increasing interest rates?
You’ve probably noticed that the price of most things has been going up rapidly over the past year. Household energy bills have doubled for many of us, and our weekly supermarket bills are rising too. A high rate of inflation is unsettling for many reasons, and central banks are increasing interest rates in an effort to bring it back down. For example, the Bank of England base rate rose to 1% from 0.75% at the beginning of May, which is the highest level since 2009.