Central banks will keep raising rates this year to ensure inflation sticks to its downward path, defying traders who expect policy makers to ease off, according to BlackRock Inc. Vice Chairman Philipp Hildebrand.
(Bloomberg) — Central banks will keep raising rates this year to ensure inflation sticks to its downward path, defying traders who expect policy makers to ease off, according to BlackRock Inc. Vice Chairman Philipp Hildebrand.
“I don’t see any chance, frankly, of easing this year — I think the market has got that wrong,” Hildebrand, the former head of the Swiss National Bank, told Bloomberg TV in an interview at the World Economic Forum in Davos.
While Hildebrand expects inflation to fall rapidly from multidecade highs, central banks globally will look to chase it down toward 2% and make sure prices expectations don’t rear up again, he added. “At best we’re going to see some sort of pause, but not yet.”
Central banks should be honest about how their tightening could push economies into recession, as some businesses struggle to cope with the end of easy money, according to Hildebrand.
“In the old world of great moderation you could get inflation under control and everything else would be fine. Now, bringing inflation back under control means you have to damage the real economy, means you cause a recession and there’s no way around this,” he said. “Bringing price stability back into the game entails, essentially, recessions.”
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