The consequences of diverging growth between the emerging and developed worlds can be seen in the difference in inflation pressures facing the two regions. While the developed world is seeing all components of inflation above their long-term levels, reflected by our Developed World Inflation Nowcaster hitting historical highs, inflation in the emerging world has yet to climb as high. Looking at the components, the main lagging factor is clearly underlying demand in the emerging world. Importantly, the recovery in commodity prices has meant that food inflation is very high, which will add further downside pressure on demand.
Source: Unigestion, Bloomberg, as of 2 June 2021
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