Global headline inflation averaged 5.6% in 4Q2022, compared to 6% in 3Q2022 — this has occurred in line with the sharp fall in food, energy and logistical costs. Nonetheless, inflation remains well above the average of 2.5% seen in the decade before Covid-19, from 2010 to 2019. However, expectations by some market participants that central banks may start easing are “excessively optimistic”, says Menon.
The operating environment for asset managers has become profoundly different from the last two decades, with inflation, geoeconomics fragmentation and climate change emerging as key drivers of financial markets, says Monetary Authority of Singapore (MAS) managing director Ravi Menon at the IMAS-Bloomberg Investment Conference 2023.
He notes that the short-term driver of risks and returns is the trajectory of interest rates, which in turn depends on the inflation outlook and monetary policy response from major central banks. “The good news is that inflation seems to have peaked and come off a bit. The bad news is that it is still quite high,” he adds.
