Global | Bond rout will end, but the real debate is just beginning
The current market sell-off should be contained with a strong verbal reiteration of existing forward guidance from central bankers in the coming days. If policy makers fluff their lines, then we wouldn’t rule out another round of asset purchases to avoid a sustained tightening in financial conditions.
But this is just the beginning of questions about the future mix of monetary and fiscal policy. We think that the use of fiscal and monetary policy to manage the economy is likely to become more balanced in the future and that is no bad thing.
However, that transition could prove painful for markets, necessitating a more delicate handling than has been evident in this sell-off.