Share markets have held up well so far this year. As expected, the emphasis has mostly been on companies that will recover sharply after their businesses were shut down or badly impaired by anti-pandemic measures.

The fund has been quiet, making modest upward progress with few transactions, with its general index investments doing better than the specialist areas in digital and green technology which shone last year.

Suddenly the talk is when will the central banks reduce their appetite for government bonds and wind down their money creation? When might they even venture a small rise in interest rates? The central banks, led by the US Federal Reserve, have been clear that they think the current upturn in inflation will prove transitory.

They plan to hold fast to their policy of printing more and keeping bonds expensive. They want to keep interest rates very low to ensure this time there is a stronger and more lasting recovery than was managed in 2010-12 after the 2008-9 global financial crisis.

The Bank of England and the Bank of Canada have already broken ranks and have announced a slowing of their quantitative easing programmes. The Bank of England assures us this is not tapering. It is adhering to the fixed amount of bond buying it has previously approved and making it last to the end of this year which requires less buying each week. There is no agreement to any extension to the programme after December. Indeed, this is not so much tapering as ending.

Moving in the same direction is the Bank of Canada which has announced a one quarter reduction in its purchase programme. It’s even willing to contemplate rate rises, even if they are small and likely to come only later.

Other central banks are clearly more concerned about the speed and durability of recovery.

The European Central Bank has promised to increase its bond purchases as it remained worried about the slow EU vaccination programme and the continuing effects of the pandemic on the eurozone economy. In practice its bond-buying has not altered a great deal.

The Fed has resolutely said it is sticking with its large buying programme despite the obvious signs of much faster money growth in the US than other leading economies and the good signs of a strong economic recovery.

So far markets seem to have accepted this, after an initial wobble over inflation fears. The Fed leads the conversation on price rises, claiming that there are some well-defined shortages of raw materials and goods such as semiconductors which will drive prices up in the short term, but will be corrected by more capacity in good time.

Officials state that inflation expectations are still well anchored. They want to run the US economy hot, with inflation a bit above 2 per cent for some time. Those worrying about inflation point out that wages seem to be going up as a result of government policies and the need for service businesses to rehire in a hurry.

The US has also added $300 a week to this summer’s payments to the unemployed, giving them more bargaining strength over pay to make work worthwhile, although not all states are implementing this measure.

All seems set for a strong recovery in the US. The eurozone too should see decent growth though its vaccine progress has been slower than in the US.

What we now need to consider is whether we have seen peak stimulus? It seems unlikely that any of the major central banks will announce larger programmes and some will allow their programmes to run off or lapse. It is also unlikely that the EU will announce any further fiscal stimulus.

President Joe Biden has opened his political discussions with Congress with a huge ask, seeking both his American Families Plan and his Infrastructure plan as part of a $6tn spend for next year.

Most US commentators assume this will be pared down. It is far too high for Republican tastes, and a bipartisan agreement looks unlikely. Even to get it through on Democrat votes there may need to be some trimming, as the right of the party is concerned it is excessive.

The president needs to be careful. Aim for too high a spending target and budget deficit, and that could worry bond investors about how easy it will be to finance it all. Aim for too little and Biden’s left will be unhappy. If the Fed remains on full throttle it will discover inflation once aroused can be difficult to remove.

So far, markets buy the idea that the big surges in the price of oil, steel, timber, building materials, electronic chips, copper and other basics reflect short-term shortages that will ease, and accept that wages and other prices will remain constrained.

That creates a favourable outlook for shares based around large rises in profits and economic recovery. Were we to see signs of wage inflation taking off, or expectations of future inflation going up more we should expect a forced retreat by the central banks.

That would be a less friendly policy background for financial assets as the authorities returned to 20th century priorities of controlling inflation through squeezing demand. If anywhere is overdoing it, it is the US, the leader of the global quoted share world.

I am keeping a lot of the bond money in cash during this period of uncertainty about bonds and inflation. Were the Fed to start to lose control of the argument that inflation is just a temporary spike I would need to consider some reductions in exposed share markets as well.

Sir John Redwood is chief global strategist for Charles Stanley. The FT Fund is a dummy portfolio intended to demonstrate how investors can use a wide range of ETFs to gain exposure to global stock markets while keeping down the costs of investing.

This article has been amended since publication to take account of changes to the fund assets (below)