Gas prices, staff shortages, lack of ships: A look at what’s making inflation stick
Global News
Central bankers, while adamant inflation will subside, are starting to concede it may stay higher for longer as a range of issues push up the prices of goods and services.
Soaring gas prices, staff shortages, a lack of ships — price pressures globally may be picking up faster than anticipated, challenging the view that inflation will prove transitory.
Central bankers, while adamant inflation will subside, are starting to concede it may stay higher for longer as a range of issues push up the prices of goods and services and lift future inflation expectations.
Their conclusions will ultimately determine how quickly policymakers unwind the trillions of dollars of monetary stimulus unleashed to ease the COVID-19 crisis.
“Will central bankers be more focused on growth and be a “bit behind the curve”? Or will they be more concerned about inflation and take the punchbowl away quickly?,” said Charles Diebel, head of fixed income at asset manager Mediolanum International Funds.
Here are five key elements in the inflation debate:
European and U.S. gas prices have soared more than 350% and more than 120% respectively this year. Oil is up around 50% and Goldman Sachs expects Brent crude to hit $90 a barrel by end-2021 from around $80 currently.
Gas and electricity make up 4.8% of the euro area harmonised-inflation (HICP) basket used by the European Central Bank. Rabobank reckons the price surge is a separate ‘shock’ that could add 0.15 percentage points (ppts) to its 2.2% euro zone inflation forecast for 2021 and another 0.25 ppts to 2022’s 1.8% projection.
Many economists see higher gas prices as here to stay, due to slowing U.S. output, rising costs of carbon emissions permits for polluters and curbs on the usage of dirtier fuels.