Higher or lower? - Equilibrium

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    Investment | Other

    Higher or lower?

    inflation blog

    Next week’s investment newsletter will delve into the debate around inflation. In the meantime, here’s a brief taster of some of the arguments…

    Why inflation will be temporarily high:

    • Base effects – prices bouncing from significant lows of last year
    • Re-opening the economy will cause a significant increase in demand for certain goods and services
    • Lots of people have excess savings and can’t wait to spend it!
    • Lots of government spending and central bank “money printing”

    Why this will not be a problem long term:

    • Unemployment is currently high and rising, and an estimated 4m people are still furloughed
    • Many businesses will struggle once government support ends
    • No real wage pressures as a result of the above
    • Long term demographics and aging population means proportion of workers will fall, leading to lower growth in future

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