Global | Is inflation coming back?

After having seemingly vanished as a source of concern for many years, the fear of inflation has re-emerged, along with the first green shoots of recovery.

Key points

• Key points:
• April and May saw a strong spike in the CPI in the United States, with indicators in various other advanced economies also pointing in the same direction. If prices continue to rise and this becomes more permanent, it could force the US Federal Reserve to raise interest rates earlier than planned, which could put a brake on recovery.
• A number of factors explain this rise in inflation. First, the base effect, resulting from the fall in inflation experienced a year ago during the worst of the pandemic. This base effect could explain the 0.7% increase in US inflation, and it will gradually disappear from June onwards.
• Another driver of price increases are the production bottlenecks in certain key intermediate goods, such as semiconductors and certain commodities, and these should, in theory, disappear once the global economy readjusts from the shock caused by the pandemic.
• One factor that could increase aggregate demand sharply and more permanently—and is the most worrying in relation to inflation—is the major US fiscal stimulus, concentrated largely in the short term.
• The monetary authorities, in both the United States and Europe (where the threat is much lower), still do not seem particularly worried. The next few months will be key to see whether the scenario of gradual normalization of inflation is confirmed.

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