Global Perspectives Podcast – Reflation: Is this the real thing or just fantasy?
Key Takeaways
- It has become a consensus trade to expect inflation but much of this may already be priced in, creating potential opportunities in medium-term bond yields if inflation proves transitory
- There was an excess of private savings before COVID-19 that required governments to spend to balance private sector saving. In some ways today’s fiscal stimulus is an extension of the response to the deleveraging environment that lingered after the Global Financial Crisis
- For reflation to be convincing we need to see evidence that households and businesses are changing their behaviour towards taking on more debt, yet credit demand remains soft and markets seem to be ignoring weaker data in China
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