The market is not ready for a re-rise in inflation, with positioning long in stocks, bonds and rates futures. Inflation has been relegated to secondary importance for now, but unwatched pots often boil over.
Structural price-growth remains elevated, while core consumer prices are still above 3% – harbingers that it’s not time to mute the inflation alarm.
It would be around now – before inflation has returned to a low-and-stable regime – that a shock arrives and prices re-accelerate.
Price pressures had already begun to boil in the late 1960s, and it was the “bad luck” of Nixon closing the gold window in 1971, the Arab oil embargo in 1973 and the Iranian Revolution in 1979 that turned the decade into the Great Inflation. […]
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