Is Global Inflation (Re)Accelerating?

2025-01-13 06:47:00 ET

Summary

• Investors have kept buying the dollar and selling treasuries at the start of 2024. The latter, in turn, has spilled over into indiscriminate selling of bonds in other jurisdictions.
• This global dimension of the bond market rout is partly justified by the fact that any upside risks to US inflation have an international component through three routes.
• US core inflation has been locked slightly below 3.5% since May, a story similar to the UK, though core inflation here has been more volatile.
• The combination of core inflation stabilising at 2.7-to-3.5% and 2% inflation targets is a problem for DM central banks.

This is the question everyone wants an answer to after another week where bonds have been beaten to a pulp, a trend which is now starting to bleed into equities. More specifically, the real question is whether US inflation is accelerating? It is too soon to tell, and for the record, we don’t think so . But for now, markets are being fed with headline macro data signalling that the US economy is more resilient than previously anticipated, as well as vulnerable to upside inflation risks. As a result, investors have kept buying the dollar and selling treasuries at the start of 2024. The latter, in turn, has spilled over into indiscriminate selling of bonds in other jurisdictions....

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