Will inflation make a comeback?

Although low inflation is likely to be the story over the next couple of years, the huge amount of policy stimulus could push up inflation further ahead. Central banks, in theory, have the tools to nip any rise in the bud. So the bigger risk is if there is an institutional slide towards accepting, or even welcoming, higher inflation. Among the major developed countries, these risks seem greatest in the US and perhaps the UK. This Focus forms part of a series exploring how the coronavirus pandemic will change the global economy. You can find other publications in this series here.
Vicky Redwood Senior Economic Adviser
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Global Economics Update

Thinking through how we could be wrong on Evergrande

If, contrary to our opinion and the consensus, a collapse of Evergrande ends up having a significant impact on the rest of the world, it will be because it first causes either major financial dislocation within China or a property-led slump in China’s economy. The latter is probably the bigger risk for the global recovery. In view of the wider interest, we are also sending this Global Economics Update to clients of our Emerging Markets Service.

Drop-In: Evergrande – What are the risks to China and the world? Chief Asia Economist Mark Williams and Senior China Economist Julian Evans-Pritchard will be joined by Senior Markets Economist Oliver Jones to take your questions about the Evergrande situation. They’ll be covering the implications of collapse for China’s financial system and growth outlook, and assessing the global markets fallout. Register here for the 0900 BST/1600 HKT session on Thursday, 23rd September.

22 September 2021

Global Economics Update

Surge in gas prices adds to near term price pressure

In this Update, we answer six key questions about the surge in natural gas prices. The key point is that it will keep inflation in DMs and many EMs above central bank targets for a few months longer than we had previously assumed. Governments are already preparing to limit the economic damage and central banks are likely to look through this temporary spike in inflation. But this comes at a time when a host of shortages are already pushing up prices and adds to the upside risks to our inflation and interest rate forecasts.

21 September 2021

Global Economics Chart Book

Global recovery slowing down a gear

There have been growing signs of a slowdown in the pace of the global recovery in recent months. World industrial production fell in July and retail sales declined in almost all major economies, while the business surveys suggest that activity softened again in August. To some extent, this moderation in growth has been benign, reflecting a natural normalisation of activity as the effects of past stimulus fade and output approaches or exceeds pre-virus levels. However, high frequency data on activities such as restaurant dining show that consumer caution has returned in some places as virus cases have risen again. What’s more, the surveys offer evidence that widespread shortages of goods and labour are limiting growth. With the notable exception of the euro-zone, we think that the rapid phase of the recovery is already in the rear-view mirror for the world’s major economies.

20 September 2021

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Long Run Focus

Global migration to bounce back

Global migration has ground to a halt over the past year or so, but we doubt that the pandemic will have any major lasting impact. Moreover, there is potential for migration to get a fresh impetus from a big rise in the number of people leaving Africa over the coming decades. This could help to mitigate the problem of ageing populations in developed markets, although countries will continue to display varying degrees of openness to immigration.

15 June 2021

Global Economics Update

How concerning is the recent rise in inflation?

A rise in inflation was always likely to happen this year as economies re-opened and energy prices recovered from last year’s sharp falls. But in the US in particular, the increase since the start of the year has exceeded even our relatively strong expectations. While this might primarily reflect transitory factors, we continue to think that the risk of a sustained rise in inflation is bigger in the US than in other developed economies.

10 June 2021

Long Run Focus

Will we start working less?

The downward trend in average working hours in advanced economies has slowed or stalled in the past few decades. Yet there are reasons to think that the decline will resume, at least in some sectors and some countries. Other things equal, fewer hours worked would dent GDP. However, a reduction in working hours could boost participation and/or make workers more productive. As for the impact on the composition of economies, a rise in leisure time could give a boost to recreational sectors.

13 May 2021
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