Global Central Banks Are Tightening Policy — And a Financial Shock Is Ahead

As inflation soars, major central banks are tightening monetary policy – threatening another shock to economies and financial markets.

Bloomberg Economics estimates that as a pandemic bond-buying blitz by central banks swings into reverse, policy makers in the Group of Seven countries will shrink their balance sheets by about $410 billion in the remainder of 2022. It’s a stark turnaround from last year, when they added $2.8 trillion to prop up economies and asset prices — taking the total expansion to more than $8 trillion since Covid-19 arrived.