If you thought market nervousness over central bank policy decisions was largely over, you might be in for a shock. Despite global markets seemingly taking the Federal Reserve's "tapering" in their stride it now appears there's a new concern on the horizon.
"Rate rage," dubbed on Friday by Dario Perkins, an economist at independent U.K.-based research firm Lombard Street Research, is a term used to describe the future market turmoil that could arise from the raising of benchmark interest rates by the Bank of England and the Federal Reserve.
"Just as markets suffered a 'taper tantrum in 2013', a 'rate rage' is possible," he said in the research note. "With central banks less able to provide clear guidance about the future, we are likely to see renewed market volatility as they start to raise interest rates in 2015. Some investors will again be anxious to sell their bonds, fearing significantly higher yields."
On May 22, 2013, the Federal Reserve's policy minutes sparked fears the central bank could start tapering off its $85 billion-a-month bond purchasing program. This came to be known as the "taper tantrum," with emerging market (EM) currencies tumbling as investors started to bring their dollars back to the U.S. in anticipation of higher interest rates.