The global economy continues to feel the pandemic-induced ruptures to consumer demand and supply chains, as annual consumer and producer price inflation remain at multi-year highs in most economies. Indeed, both the Federal Reserve and the European Central Bank have recently upped their inflation forecasts, suggesting that even central banks have had to acknowledge that current price pressures are stronger and longer lasting than originally anticipated.
These dynamics have not only occurred in headline inflation, which is prone to cyclical swings in energy and food prices, but also in core inflation readings. Consequently, while the world is seeing the highest inflation uncertainty in years, the debate around the nature and the duration of these price surges, i.e. whether they are transitory (and will eventually pass) or more permanent due to second-round effects, rages on. Our base case remains an environment where inflation will settle below current levels but above central bank targets next year. But the risks are skewed to the upside at this stage.
To read the full report, click on the link: LGT Beacon
To subscribe to a weekly newsletter, go to subscriptions.
Note: The next edition of the LGT Beacon is scheduled for November 2021.