Inflation Risk on the Rise

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Our proprietary World Inflation Nowcaster has seen a very sudden and rapid rise – a trend seems to have begun, and we expect it to continue in the quarters ahead. It has already passed the symbolic level of 0.5 standard deviations, which usually implies an average surprise of 38bps. This would see the current consensus forecast of 2.8% for global inflation in 2021 revised up to 3.2%. The last times we saw readings this high were May 1995, March 2000 and January 2011. All of these episodes were followed by inflation beating expectations by an average of 0.6%: +0.5% in 1995, +0.5% in 2000 and +1.0% in 2011. If this was to happen again, then the US CPI would reach a yearly growth rate of 3.6% – levels we have not seen since 2011 and the peak of oil prices, or since 2008 and the aftermath of the strong growth momentum of 2005-2007.

 

Inflation Risk on the Rise

Source: Bloomberg, Unigestion. Data as at 16 April 2021.


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