Inflation Risk Is High

| Multi Asset

From a macroeconomic perspective, all the elements are in place for surging inflation pressures to continue for longer than central bank rhetoric would suggest, particularly the Fed’s. Given currently expected levels of growth, a traditional and historical view of the global fundamental backdrop would prompt a more hawkish tone from policymakers globally if it wasn’t for the level of uncertainty surrounding the future evolution of the pandemic.

In its latest FOMC meeting, the Fed upgraded its growth forecast for 2021 from 4.2% to a stunning 6.5%, while realised inflation for the year is expected to exceed the central bank’s initial target without massively overshooting. However, we think that there is a risk that inflation pressures will be less transitory than expected, increasing the odds of the Fed sitting “behind the curve” and later being forced to change course more rapidly than projected.


Inflation Risk Is High
Source: Bloomberg, Unigestion. Data as at 26 March 2021.

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