It’s Time to Talk About the Bogeyman in the Market: Inflation

Financial markets have become obsessed with the possibility of faster-than-normal inflation this year as economies reopen from Covid lockdowns. But inflation is a nuanced concept, so what different types of price rises should we expect? And most importantly, what does it all mean for markets in 2021? Joining the "What Goes Up" podcast this week to discuss this and other timely market topics is Philip Lawlor, head of global investment research at FTSE Russell.

Some highlights of the conversation:

“This is all about temporary base effects and supply disruption hitting a pickup in demand. The risk is that this is going to hit an economy where the labor market is not going to see wage growth. We've still got some structural headwinds in terms of the labor market as we work through this Covid impact. And I think the central banks are quite right to most probably just say, `we've got to err on the side of caution and just wait to see how this works its way through.’

“Of course, if that leads to a structural shift and we do get that being reflected in a pickup in growth, then they need to respond more aggressively. But don't act too quickly because that will create what we call a policy mistake. “

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.