Euro goes into reverse as ECB crisis talks fail to calm markets

Central banks have a case for front-loading interest rate rises as they walk a “fine line” between controlling inflation and supporting the economic recovery, Mark Carney has said.

The former Governor of the Bank of England told Bloomberg: “Central bankers need to catch up to their economies. They’ve been behind the curve, they’ve acknowledged this.

“And they need to start to get interest rates above inflation effectively, or at least inflation expectations.”

Mr Carney, who is now a vice chairman at Brookfield Asset Management, said it “does make sense to front-load”, referring to the rapid rate cuts that the Bank of England carried out in the aftermath of the financial crisis and the Brexit vote. 

He added that the ECB had “rightly in my judgment” pulled forward quantitative tightening and will be keeping an eye on “outsize” spreads widening in the periphery of the eurozone during an extraordinary meeting today.

“It’s an unusual situation to be taking away with one hand, prospectively in the case of the ECB, but looking at how you can support market functioning and give with the other hand,” he said.

Mr Carney added that the Federal Reserve could “ultimately, perhaps” find it necessary to raise rates to 4pc, having responded slowly to inflation as the US economy emerged from the pandemic.