If you were wondering when will regulators finally acknowledge an inflation treat and do something about it, maybe the holiday season in December is just the right time for that. Both ECB and FED have confirmed the inflation goes beyond their expectations and are imposing first measures towards tightening their respective monetary policies. For the time being, it is still in zone of fine tuning. Their existing pandemic emergency supporting programs will be reduced from January 1st. ECB goes a bit further comparing to FED by announcing full cancelation of the stimulus program by spring.

Though inflation in US is exceeding one in EU zone, FED is still reluctant to announce full cancelation of the stimulus program. Once the targeted employment is reached, the very last condition for its termination will be met. Recent statement made by Governor Waller on inflation confirmed what seem to be obvious to an average customer for quite some time, “it is alarmingly high, persistent, and has broadened to affect more categories of goods and services, compared with earlier this year”.  He provided an interview on the overall economic outlook only few days after the announcement made by FED’s Committee confirming it is going to reduce volume of net asset purchases in Q1 2022. So far, they were at the level of 90bn every month and from January it will shrink by 20-30bn.

The Bank of England is even more proactive, on December 16 it has decided to raise it’s base rate for 15bps, from 0.1% to 0.25%. The increase comes after official data published this month showed prices increasing at the fastest rate for more than a decade.

New Year will probably bring an answer to a long-standing question, whether the era of negative interest rates might finally come to an end.