Inflation on the rise?

21 October 2020


ASR's Head of Research and co-founder David Bowers discusses possible post-pandemic inflation scenarios and the new Fed inflation regime.



For professional investors only



❑ We’ve just Witnessed an Extraordinary Monetary Stimulus
     — FRB balance sheet doubled in 6 months
     — Global narrow & broad money supply up 22%y and 14%y respectively - annual growth rates last seen in 1993 and 2008 respectively
❑ A Regime-Defining Change in Policy Mix
    — Review of Central Bank Mandates – Central Bank “Mission Creep”
    — The Activation of Fiscal Policy
    — Convergence of Monetary & Fiscal Policies
❑ A Turning Point for - and against - Globalisation
    — From ‘social distancing’ to ‘economic distancing’ & economic ‘self sufficiency’
    — Autarkic tendencies: Trend to re-shoring/de-globalisation
    — From global output gap to national output gaps
    — With conventional monetary policy close to its limit, and with country outcomes diverging, FX volatility looks likely to rise => inflation volatility set to rise too
❑ Two Short-term Inflation Wildcards: the Inventory Cycle & the Dollar


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