The Federal Reserve and the Bank of England are right to be turning hawkish, according to Jim O'Neill, senior advisor at Chatham House.
Speaking to CNBC's "Street Signs Europe" on Monday, O'Neill, a veteran economist and former chairman of Goldman Sachs Asset Management, said the Fed's change of language was overdue.
"If you put aside the risk of uncertainty about the [omicron] variant, when you end this year where we have ended with the scale of recovery we have had — notwithstanding what is probably a statistical fluke with the payroll survey Friday — the huge bounceback in growth, why do we need the same scale of emergency monetary policy that we had 18 months ago all over the western world?" O'Neill said.
O'Neill argued that keeping policy at historically accommodative levels risked central banks having fewer options if additional stimulus is needed due to another economic shock in the near future. He suggested policymakers would be better off tightening now to contain inflation while growth is running hot, giving themselves room to unwind in case of emergency.
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