Publications

- March 1, 2022: Vol. 15, Number 3

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The inflation equation: Inflation is back and investors are recalibrating expectations

by James Wallace

Inflation is an insidious economic risk with the potential to erode value in investments if not managed appropriately. During the past two years, the primary catalyst behind the surge in inflation was the more than $10 trillion in fiscal and monetary stimulus injected by governments and central banks worldwide in response to the pandemic, according to the International Monetary Fund (IMF). This vast liquidity increased the consumption power in the global economy, which was a tailwind for global demand but a headwind for prices. Creeping supply-side pressures exacerbated this dynamic.

Periodic mobility and labor constraints, caused by pandemic lockdown restrictions and labor market health problems, reduced manufacturing output and power shortages, pushing up the price of energy, commodities and raw materials. Disrupted supply chains and high demand for goods have intensified and broadened inflationary pressures into labor, housing and food price increases.

“Many

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