There is no business like central bank business

Dubai - The trouble with reading central bankers in the past was that it was always time-consuming. So please do not expect the world to look different after the past weekend.

The summer of 2021 has not lived up to expectations. A summer of relief was in the cards, as life was meant to go back to normal. Yet in the past few weeks, some party poopers have appeared. First of all, the pandemic does not seem to be over but rather going into yet another variant. This time around, it is flaring up in new groups (the young) and haunting Asia again. The pandemic situation has been in constant flux anyway. What looks like a sound strategy by the authorities today, can look highly uncertain a little while later.

Take the ‘zero-Covid-19’ strategy that was applied in many Asian countries. While this was highly successful last year, the Delta variant points to a shift in favour of a pure vaccine-based strategy. But even here, the higher the infection rates, the higher the required vaccination rate. While everyone feels like an expert in the field after 18 months of pandemic spotting, we do not claim to be able to anticipate where dynamics are heading.

The second party-pooper this summer was inflation: The price spikes in goods and services — as much expected as they were — are now seriously damaging consumer sentiment by much more than expected. Granted, consumers curbing their spending to wait for prices to normalise is a good thing, as it shows that inflation is not turning from cyclical to structural. Yet some observers claim that the severity of the drop in consumer sentiment points to a more fragile global consumer who has been traumatised by the experiences of the past 18 months. This raises some questions for macroeconomic policymakers.

The writer is head of research at Julius Baer. Views expressed are his own and do not reflect the publication's policy.