Investors must prepare for sustained higher inflation
The costs of taming price rises could prove too unpalatable for central banks
At first glance the world economy appears to have escaped from a tight spot. In the United States annual inflation has fallen to 4%, having approached double digits last year. A recession is nowhere in sight and the Federal Reserve has felt able to take a break from raising interest rates. After a gruesome 2022, stockmarkets have been celebrating: the s&p 500 index of American firms has risen by 14% so far this year, propelled by a resurgence in tech stocks. Only in Britain does inflation seem to be worryingly entrenched.
This article appeared in the Leaders section of the print edition under the headline “The trouble with sticky inflation”
From the June 24th 2023 edition
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