Oliver Mangan: Avoiding recession and achieving a soft landing going to be tough for central banks

Slowing activity without pushing the economy into recession is hard to do at times of high inflation

Christine Lagarde, president of the ECB: The risk of a policy error is high as rates are hiked.

Over the past week, financial markets have scaled back somewhat their expectations on the extent of central bank rate hikes. It may be that markets now believe they have priced in sufficient rate tightening for central banks to get inflation back under control, amid growing concerns about the economic outlook.

The objective of central banks is to achieve a so-called soft landing. In other words, they aim to tighten policy so that it slows activity enough to bring inflation back to target, without pushing the economy into recession. This has been achieved in the past, but not always, and it has proved particularly hard to do at times of high inflation.