Are Central Banks Pulling the Plug on Stimulus?

Central banks are shutting down the music and turning on the lights after a near decade-long bond market party that resulted in ultra-low yields and low volatility.

In the past two weeks, interest rates have been rising, at the prodding of the world’s central banks. Some bond strategists now see the possibility of a shift to a more fundamental-driven market, which could result in higher, more normal interest rate levels that will affect everything from home mortgages to commercial loans.

That doesn’t mean the wake-up call will be a jolt, with rates snapping back violently or markets spinning out of control—though it could if rates begin to move too quickly. For now, market pros expect the rising interest rates of the past several weeks to be part of an orderly adjustment to a world in which central banks are preparing to end excessive easy policies.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.