Central banks 'on verge of policy mistake territory': Strategist

• Central banks are on the 'verge of policy mistake territory' by hiking rates for a supply-side energy shock.
• Interest rate hikes sufficient to curb energy demand would be 'seriously high' and 'recession-inducing'.
• Consumers may substitute spending, reducing non-energy inflation, and corporations are good at price setting to mitigate inflation.

Julian Howard of GAM Investments warns that central banks are on the 'verge of a monetary policy mistake' by considering interest rate hikes to combat energy-driven inflation, which he views as a supply-side shock. He argues such hikes would be 'recession-inducing' and ineffective against the direct cost of energy, suggesting consumers will substitute spending. He believes corporations are adept at price setting to mitigate inflation.