After misjudging inflation for almost a year, central banks are now facing the difficult reality of tightening financial conditions into a decelerating global economy. Due to different central bank mandates and dissimilar economic backdrops, monetary policy responses have diverged quite substantially.

The BoE, Fed and SNB have become more aggressive and are willing to bring down demand to achieve their 2% inflation target. Others like the ECB are already discussing new bond buying or anti-fragmentation tools before the first hike has even materialised. The Bank of Japan is even less concerned and is sticking to its yield curve control even if it means putting additional pressure on the yen. Nonetheless, higher rates and the end of asset purchases have already affected financial markets, which have lost trillions in value over the past months.

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