By Sam van de Schootbrugge 04-05-2021
In: hive-exclusives | Monetary Policy & Inflation

How Inflation Drivers Are Changing

(4 min read)
Resize text:


Few would disagree that the drivers of inflation have changed over the last 30 years. This has manifested through lower average inflation rates and created a disconnect between G4 inflation dynamics over the last decade (Chart 1). Changing inflation dynamics alongside a rarely seen and seemingly unconstrained pro-growth fiscal policy mandate mean even the experts struggle to confidently predict where inflation will go in coming years.

A principal component analysis (PCA) sheds some light on the underlying drivers of G4 inflation. In the early 1990s, the first principal component (PC1) of G4 headline and core inflation explained around 90% of the variation over time and across countries. The two moved in tandem through the 1990s and 2000s but diverged over the last 10 years. In other words, the core inflation dynamics across G4 countries have become less inter-connected.

TO READ THIS HIVE EXCLUSIVE
SUBSCRIBE TO MACRO HIVE PRIME

£39/month thereafter

For access to our Slack Chat Room, where we discuss all things markets with our researchers and subscribers

START YOUR FREE TRIAL


MOST READ

Weekly Vaccination Update: US Vaccination Rates Face Largest Setback Yet (3 min read)

By Sam van de Schootbrugge | Apr 28, 2021
This week, an average of 16.6mn vaccinations were administered globally every day, up 1% WoW. The largest improvements were...

India’s Local Lockdowns Trigger a Sharp Slowdown in Mobility (2 min read)

By Caroline Grady | Apr 27, 2021
Six consecutive days of above 300,000 new COVID cases are taking their toll. On Sunday, Delhi extended its six-day lockdown...

Worrying About Biden’s Capital Gains Tax Headline? Don’t! (2 min read)

By John Tierney | Apr 23, 2021
Talk about horrible headlines. President Joe Biden wants to boost the capital gains tax to 39.6% for people making more than $1 million...

PREMIUM CONTENT

Why Growth Stocks Are Looking Good Again (4 min read)

By John Tierney | Apr 26, 2021
Summary In equity markets, the 2021 storylines…

FOMC Preview: All About Taper Timing (2 min read)

By Jon Turek | Apr 27, 2021
Summary Market focus ahead of Wednesday’s FOMC…

Five Things You Did Not Know About China (2 min read)

By Bilal Hafeez | Apr 13, 2021
China is a global economic superpower, yet…

Want To Join Our Community Of Leading Investors And Researchers In Our Slack Chat Room?

SE