Crisis over interest rates may soon reach breaking point

The pressure is mounting on the European Central Bank to keep lifting interest rates until next year at the earliest for fear inflation rebounds

Christine Lagarde, the European Central Bank president: facing pressure to keep raising interest rates. Picture: Getty

The financial world’s recent addiction to ultra-low interest rates and cheap money is likely to face a very stern test over the coming months.

Even as central banks in the US and Europe hiked their rates at the fastest pace in history over the past year to combat soaring inflation, the optimism inherent in certain parts of the financial system continued to believe it was a temporary phenomenon.

A blog by economists at the International ...