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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