The rollercoaster ahead for the economy and investors

US central bank policy mistakes and market stress are worrisome possibilities in the months ahead

THE stunning shift in the market mood and prices over the past week is testament to the underlying instability in the current environment for policymakers and investors. And it is an instability that will intensify in the coming months.

The catalyst for what many labelled "market carnage" on Tuesday (Sep 13) - 3 to 5 per cent single-day losses in major US equity indices - was, of course, an ugly inflation report. And the August figures for the US were disappointing in so many ways including, most importantly, a higher month-on-month increase and broadening in drivers of core inflation.

Judging from the dramatic surge in the 2-year government bond yield, as well as moves elsewhere in Treasuries,...


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