US Inflation Comment
Yesterday’s US CPI release was much stronger than expected with headline inflation (measured as the year-on-year % change in the CPI) at its highest since September 2008 and core CPI inflation (ex food and energy) the highest since 1996. This has bolstered fears about a return to the stagflationary conditions of the 1970s which saw the unpalatable combination of high unemployment and high inflation coexist for a number of years. Rising commodity prices, supply chain problems (such as for semi-conductors), declining global trade and commercial rigidities resulting from Covid restrictions are all cited as reasons why we should be concerned about the rise in inflation being more than transitory.
