Laxminarayan says: “One simple data point says it all: US annual inflation fell for an unprecedented eleven consecutive months up until May.” Although a consumer inflation percentage of above 4% is still “pretty steep”, Laxminarayan notes that consumer prices are typically the last to reflect change. Meanwhile, producers, who witnessed a disinflation in their prices last month, are the first to see this decline in prices. He takes the current high rental and housing prices against the declining prices of gasoline as an example; one year ago amid the backdrop of an energy crisis, there was no end in sight for the soaring prices, yet one year later, gas prices have trended downwards, which is proof that the market will always find an equilibrium. “The fact is that the inflationary trend is more or less done, [and it] will feed its way into the consumer prices at some point,” Laxminarayan adds. He cites the Cleveland Federal Reserve’s forecast of 3.2% for consumer price inflation for the month of June, noting that they have been accurate in predicting near-term inflation numbers in the past.
Geopolitical tensions, sky-high inflation rates and catastrophic banking failures have underscored a stormy market so far this year but experts at Julius Baer believe that the second-half will still be “sunny outside”. Speaking at the mid-year market outlook media roundtable on July 3, Bhaskar Laxminarayan, CIO and head of investment management for Apac, and Mark Matthews, head of research Apac, are sticking to their view that this year is the “year of the cool-down” and anticipate that the global economy will become more balanced by next year. Inflation — something that has been talked about ad nauseam — will still be the key data swaying how economies will fare in the coming quarters. For now, the latest data is lending weight to expectations that inflation is trending lower, having dipped below 5%.
