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3 Inflation Scenarios: How Bad Could It Get?
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3 Inflation Scenarios: How Bad Could It Get?

Larry Light
Chief Investment Officer, 2021
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The COVID-19 lockdown created supply shortages everywhere, and reopening economies has unleashed pent-up demand for goods and services. The result has been inflation, the ultimate trajectory of which is unknown but subject to much debate. Financial journalist Larry Light scopes out the possible paths inflation could take in the United States, in an economy long removed from the late 1970s’ double-digit price scourge. His spot-on reporting will interest executives, investors and householders.

Summary

An increase in inflation is worrying markets and money managers.

Inflation has been subdued for a long time. The US Consumer Price Index (CPI) averaged below 2% in 2019 and 2020. But as of August 2021, year-on-year prices rose by 5.3%.

Institutional investors are struggling with the uncertainty of how long these price rises will last and how they might affect interest rates. The possible impact on bond yields has asset allocators worried. Wage hikes could be a barometer for future CPI increases.

Several circumstances are pushing up prices.

COVID-19 created shortages, leading to higher prices that consumers will likely have to absorb. Wholesale...

About the Author

Larry Light is market editor for Chief Investment Officer magazine.

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