How things connect

Policy normalisation is a great post-Covid challenge. It will be forced on policy makers by markets, rather than being an initiative taken by the authorities. And the more policy makers do to hamper this adjustment, the more markets will distrust the economic outcomes. In a phrase: the policy powder is spent. This does not mean that governments and central banks could not do more. They always can. It means their doing more would have a negative effect on markets and economies rather than generating a positive result. Our judgement is that we are at, or close to, this tipping point.

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