Central banks in danger of misreading markets

London

ACCELERATING inflation and rising bond yields indicate that central bankers are misreading markets.

With the exception of Canada, which for the first time in seven years raised rates by 0.25 per cent to 0.75 per cent, other central banks are postponing increases. Bond yields signal that the US Federal Reserve Board (Fed), European Central Bank (ECB), Bank of England (BOE) and several others are behind the curve. Economies are growing faster and inflation, with monthly kinks, is slowly but steadily rising. Ten-year sovereign bond yields, an indicator of growth and inflation are now much higher than the lows of 2016. Moreover, with the exception of the US and Singapore, real inflation adjusted yields are negative, indicating that bond prices are still high and yields too low.