This week’s focal point was Wednesday’s (10 November 2021) eye-watering 6.2% US CPI inflation reading.
You need to go all the way back to November 1990 to remember US inflation this high. As an aide-mémoire, Margaret Thatcher was the UK’s Prime Minster and George Bush senior was the US President; and US (and global) inflation rose sharply due to a surge in the oil price following Iraq’s invasion of Kuwait.
And of course, the sharp rise in the oil price we have seen since its coronavirus-induced collapse in April 2020, coupled with supply-chain disruptions, have been the main contributors to the current higher inflation readings – hence why we have been warning in these commentaries that inflation readings over the coming months are going to be eye-watering!
Although we fully expect inflation will continue to rise in the coming months, we also continue to believe that this inflation spike is transitory and higher interest rates aren’t the answer.