When I was a kid, I learned about inflation because the price of my favourite comic book kept increasing by about twenty Pfennig every so often. Now I pay £36 for a Steak without sides at a pub, where I used to think £16.95 was a bit rich for a fairly bland affair. My American friends tell me they are paying $80 for the same, but then again the portions are a lot bigger in Dallas, where the Cowboys will feast on the Eagles next weekend.
Sure, our wages have gone up, but the sticker shock clearly remains. So, have rates finally and definitely peaked, and let the pain be over? The Central Banks are telling us no, but they kind of have to, lest they excite the thundering herd of speculators who live to add fuel to the very fire they are working so hard to get under control. Fact is though, growth has stalled, the labour markets have slightly tightened, and we are definitely eating out a lot less these days.
It all looks like the job is done, and hey, we may even get a soft landing. An educated guess would put US & UK interest rates somewhere between 3 and 4 percent for the medium term, and in Europe traditionally about a percent lower. Of course, we might get a few hiccups. Bond volatility has been the highest in centuries, but sooner or later a lower equilibrium will be found. Let’s face it, we are not going to be able refinance trillions in debt at higher interest rates. Welcome to the Santa Clause rally and the Goldilocks scenario, if you can believe it.