Bungled monetary policy raises stakes for issuers and investors

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Inflation and geopolitics have become the primary concerns of global public investors, supplanting the winding-down of central bank asset purchasing schemes. However, the findings of an OMFIF survey of reserves managers previewed at the public sector debt summit show that many of them appear relaxed about the challenges arising from an inflationary environment not seen for at least three decades.

Speakers at the summit offered several reasons for reserves managers’ collective sangfroid. One of these, which became a recurrent theme at the summit, was that the majority of professionals across the investment management community find themselves in terra incognita. Few have experience of operating in anything other than an environment of abnormal monetary policy. This has maintained ultra-low interest rates long beyond their sell-by date.

There is a more tangible and quantifiable explanation for investors’ apparent equanimity. This is that their…

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