While the economic fallout will not be as severe as it was with the first lockdowns, the surge in virus cases will weigh on activity in Q1. Vaccine rollouts should provide a boost to the global recovery, but not until the second half of the year. Headlines have (rightly) concentrated on vaccine developments. But one issue that has slipped under the radar is that headline inflation rates are set to surge in the next few months. Indeed, the contribution of energy price inflation to headline rates will spike in April as the fall in oil prices that occurred during the early stages of the pandemic enters the year-on-year comparison. But with core price pressures generally still subdued, policymakers should look through the rise.
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