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Sanity appears to be returning to central bank policymaking

 Years of overblown asset prices and mispricing of risk may be giving way to more normal conditions

Since the turn of the year the rules of the game in markets have been dramatically upended. Gone are those notorious acronyms Fomo (fear of missing out), Tina (there is no alternative to higher risk equities and credit) and BTD (buy the dip).

The big question is whether this all marks the end of asymmetric monetary policy, whereby central banks have repeatedly put a safety net under collapsing markets while declining to curb irrational exuberance.

 It is important to note that the real policy interest rate remains negative. 

Global non-financial corporate debt rose to $86.6tn. This sum suggests a greater than usual corporate sensitivity to interest rate increases and a serious vulnerability.

John Plender FT 7 May 2022


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