Markets are currently struggling with contradictory information and are therefore in quite a confused state. On the one hand inflation is gathering pace but at the same time commodity prices have fallen back sharply as fear grows the pace of economic growth is slowing world wide.
In the Far East, China and India have been raising interest rates to subdue inflation whilst in the US the Federal Reserve continue with expanding the money supply.
Whilst it must be good news that the policy is working markets have been comforted with this approach enjoying the historically low rates and are nervous of this prop being removed.
In Europe the sovereign debt issues present interest rate problems. France and German economies are booming and probably need interest rate rises, whilst Greece, Ireland Spain and Portugal need economic stimulus and low rates.
