Rising interest rates and market volatility | March 2022

While the Ukraine crisis has undoubtedly destabilised markets, they were already fragile. Inflation has been the key driver for this uncertainty, with CPI in the US tipping over 7%. For the first time in 40 years, investors need to contend with central banks tackling a sharply rising cost of living by raising interest rates

Food and fuel remain the key areas of rising prices. Labour shortages, rising processing costs and delivery concerns have pushed the UN Food and Agriculture Organisation’s price index up by nearly 50%. At the same time, energy prices have spiked in response to the Ukrainian crisis.

Having initially considered inflation to be transitory, central banks are now starting to act. All eyes are on the Federal Reserve, which may raise rates for the first time since 2018 in its March meeting. This change of mood has delivered higher bond yields and may prompt a significant rotation in markets in the year ahead.

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This episode was recorded on 01/03/2021

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