A number of the world’s largest bond investment firms have declared that the financial market is misguided if it believes central banks will win the battle against high inflation in the long run.
According to Bloomberg, there are some doubts in the United States and Europe about boosting interest rates to reduce inflation rates, which have reached their highest levels in decades, whether by slowing or even stopping the economy.
However, a diverse group of investors and experts from major financial investment firms such as Pacific Investment Management Co. Pimco, Capital Group, and Union Investment believe that a drop in the inflation rate from record levels will not result in the return of price stability, as has occurred in the recent past due to major changes in the global economy.
According to analysts and investors, during the globalisation boom period, cheap labour costs and raw material prices helped keep inflation low, but now things are changing, with oil and natural gas prices rising as the United States and Western Europe break trade connections with Russia.
The previous 20 years of mild inflation are officially over, according to Tiffany Wilding, North American economist at Pimco, which has $1.
At the end of June, there were $8 trillion in assets under management.
Wilding forecasts a period of very unpredictable inflation as the world strives to adapt to the changes, which will result in a spike in the prices of production inputs in general, resulting in a price adjustment over many years.
This picture, according to Bloomberg, challenges expectations that prices would begin to fall again, as well as the potential of the US Federal Reserve (Central Bank) decreasing interest rates over the next year in order to drive the US economy into growth.
The yield on the market’s benchmark 20-year US Treasury note is now around 3%, roughly half a percentage point lower than its peak in mid-June.
According to Ivailo Veselino, chief economist at IMSO Asset Management, the anticipation that central banks would be able to decrease rates in a lot of nations is a huge problem. He anticipates longer-term bond rates to climb while guaranteeing that the high rate of inflation remains for a longer period. It is tough to confirm.
Large investment firms doubt the probability of a long-term victory over inflation.
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