Where will all the money printing lead to?
Inflation. Inflation. Inflation. For years deflationary pundits and bond-bulls have laughed at the warnings given by inflationary gurus that these reckless money printing by the central banks of the world will eventually lead to higher inflation, which may prove difficult to control.
In Norway, the central Bank has pushed interest rates to record low to 0.5 percent but the latest inflation figure should reveal a moment of truth that they can’t go lower without building up high inflationary risks. According to latest data, inflation, as measured by consumer price index rose 0.6 percent in June, followed by a rise of 0.3 percent in May. On yearly basis inflation has reached 3.7 percent in June, a level not seen in more than 7 years.
If the trend continues, Norges bank will have to abandon its easing and move to hike rates in order to remain within its mandate. This trend is likely to become global but slowly and in such a case, central banks which are still easing such as the European Central Bank (ECB) or Bank of Japan (BoJ) will have tough choices at their disposal.
The material has been provided by InstaForex Company – www.instaforex.com