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FX PilotA lesson on the importance of normalisation


Has the equity market ever slid so aggressively on an inflation scare before? We still believe what is really troubling the market is that low or zero productivity gains can only be offset by other factors, such as low interest rates or tax cuts, temporarily. In the long run, improved productivity needs to return to support sustainable gains. If that does not occur, equity prices will start to fall once interest rates climb higher again, especially if the first sign of higher inflation is higher wages. It has not been the easiest start for the new head of the Fed, Jerome Powell, but he is probably grateful to his predecessor for how advanced the central bank's process of normalising monetary policy is. Is there a lesson to be learned for the Riksbank?


Lars Henriksson


Foreign Exchange

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