Research Briefing | Jan 27, 2022

Rising risk of a higher inflation regime for global economy

Global | Rising risk of a higher inflation regime

The risk of a shift to a higher inflation regime in advanced economies has risen in the last six months, but markets may be under-pricing the risk in our view. The danger of a new inflation regime – 4% a year or more for several years – is greatest in the US, where we estimate the probability to be now 20%-25%.

What you will learn:

  • Long-term structural drags on inflation are largely still present, so our baseline view remains that medium-term inflation will stay low.
  • But our views on the risk of an inflation regime shift have shifted due to several developments.
  • Inflation has been higher and stickier for longer than expected, and analysis of the composition of inflation indices in the US in particular suggests broader price pressures. Some upward price shocks are also still ongoing.
Back to Resource Hub

Related Resources

construction site

Post

Firms must brace for higher ‘new normal’ construction material prices

New research by Oxford Economics suggests that construction materials prices have shifted permanently higher due to the shocks of the past couple of years. Project managers and investors should anticipate costs being at least 15-20% higher in 2024 and onwards than in 2021.

Find Out More

Post

New Activity Trackers suggest momentum is waning

After a choppy first quarter of GDP data, our novel Activity Trackers (which incorporate proprietary daily sentiment data from Penta) suggest that economic momentum in EM Asia is on a softer trend in Q2 (at least outside of China) supporting our view of easing underlying inflationary pressures and diminishing appetite for further rate hikes.

Find Out More