Central banks may be forced to tighten monetary policy

The S&P 500 rose 0.8 percent last week, snapping a two-week losing streak.

A rise in the US 10-year Treasury yield above 1.6 percent momentarily threatened the stock market after the Labor Department reported strong job growth of 379,000 in February.

However, the 10-year yield fell back later, enabling stocks to recover and end the day and week in positive territory.

Still, Alex Ross, Client Manager at Western Union Business Solutions, thinks that “the inflation beast is finally awakening”.

Ross said that the recent interest rate moves show that the bond market “is clearly seeing inflation ahead” and that central banks will eventually “be dragged kicking and screaming towards monetary policy tightening”.

Gary Biddle, professor of Financial Accounting at the University of Melbourne, warned that the stock market could collapse as a consequence.

“It is inevitable that central bankers will abandon the Covid-19 fight in their inflation fright. In doing so, they could cause markets to collapse, as they have before.”