Inflation: not so temporary? July Economic commentary from HSBC

Inflation: not so temporary? July Economic commentary from HSBC

Key points

  • As economies around the world re-open after Covid lockdowns, prices for many goods are rising rapidly, leading to spikes in rates of consumer price inflation.

  • Until recently, it has been generally assumed that inflation rates would soon fall back to pre-pandemic levels. But the strength of recoveries in advanced economies, and signs of labour shortages, are casting some doubt on those assumptions.

  • Meanwhile, some of the enforced savings built up by households will continue to be spent on consumer goods, ensuring elevated demand for cars, furniture, and home and garden improvements.

  • In the UK, the Bank of England is now expected to begin raising interest rates from the spring of 2022.

  • In the USA, where the Federal Reserve has a different mandate, the first rate hike isn’t expected until the middle of 2023.

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