By CGTN's Leah Duncan
Inflation has been climbing around the globe. The US consumer price index recorded its biggest increase in almost four years in January, while consumer prices in Britain rose at their fastest pace in two-and-a-half years.
Stabilization and a hardening oil price are driving up headline inflation, according to Paul Sheard, Chief Economist from American publicly traded corporation, S&P Global Inc.
CFP Photo
Regarding US central bank policy, firming inflation and a tightening labor market could allow the US Federal Reserve to raise interest rates multiple times in 2017. Chair Janet Yellen told lawmakers last month that "waiting too long to remove accommodations would be unwise."
Central banks usually have a crucial role to play to ensure economic and financial stability, conducting monetary policy to achieve low and stable inflation.
Rising inflation may also mean households have less spending power, but economists say an improving labor market would support relatively robust consumer spending.
CFP Photo
As for whether rising inflation will stick around, Reuters chief markets correspondent Jamie McGeever says it’s too soon to tell, but also warned about the parallel in 1994.
“Many economists and market analysts point to 1994 when the Fed found itself behind the curve and a bond market selloff saw interest rates rise and inflation pick up and the Fed had to play catch up. That created huge ructions in fixed income markets and currency markets and the Fed doesn’t want to find itself in that position again,” McGeever said.
Michael Kelly, Global Head of Pinebridge Investments on inflation on CGTN's Global Business
Global Head of Pinebridge Investments, Micheal Kelly, however, said inflation is not necessarily a bad thing, as long as it is at the correct amount.
“From a market perspective, 2-4 percent (inflation rate) is the sweet spot for the market,” Kelly said. “Two to four is reflation, with prices rising slowly, away from a dangerous level to a healthy level. We are very bullish on a lot of things these days.”
