Rising demand could trigger inflation

WITHu At the beginning of the investment year 2021, investors focus on the risk of rising inflation. The background is global economic upheaval, coupled with the extremely expansive monetary policy of international central banks and exacerbated by the corona pandemic.

The economist Robert Baur sees a strong likelihood of somewhat higher inflation from 2022 or later. “That would end the 39 year long downward trend for long-term interest rates and would be a risk for stocks and bonds,” writes the chief economist of the fund company Principal Global Investors in an outlook published on Tuesday.

Rising prices would turn the trend and create a fairly new situation in the markets. Because, according to Baur, globalization has caused disinflation for four decades since the opening of world trade in the 1980s, i.e. for a long period of time with a greatly reduced rate of inflation.

This can be explained, for example, by the fact that, thanks to globalization, consumers in industrialized countries were able to buy cheap goods from emerging and developing countries. Should the pandemic weaken globalization, that could also mean an end to weak inflation.

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