The march of central banks towards tighter monetary policy has stepped up over the last few months. Central banks in Norway, New Zealand and South Korea have raised interest rates, the Bank of Canada has ended quantitative easing and brought forward its expected first rate hike, the Bank of England looks likely to start raising interest rates soon, and several emerging market central banks have raised rates.

In the US the Fed has flagged that it’s likely to announce the start of tapering its bond buying at its meeting this week. This is likely to see its current bond and mortgage-backed securities buying program of $US120bn a month reduced by $US15bn a month such that it ends by mid next year. The Fed’s post meeting statement and press conference is also likely to be a bit more hawkish reflecting more concern about inflation and rate hikes are likely to start in the second half of next year.

And in Australia, having reduced its weekly bond buying from $5bn to $4bn, the RBA has now ended its 0.1% yield target for the April 2024 bond (which had helped keep 2 and 3-year fixed mortgage rates around 2%) and implicitly brought forward its guidance on the first rate hike to late 2023 (previously this was not expected to be “before 2024”).

Missing in this are the Bank of Japan and European Central Bank that both show little sign of moving towards monetary tightening reflecting their history of lower inflation rates.

But the broad hawkish move by central banks has caused ongoing bouts of uncertainty in investment markets – with concern at times that central banks will be too slow to tighten which will see inflation spiral out of control, but at other times concern that central banks will raise prematurely crunching the recovery. So, should investors be concerned?