(Bloomberg) — Markets have failed to grasp the scale of the inflation challenge facing the global economy, according to the head of Asia-Pacific financial markets research at Rabobank.
Monetary or fiscal policies to adjust demand aren’t the answer to price pressures from pandemic-related supply chain disruptions, Michael Every said in a Bloomberg Television interview Wednesday.
Markets “are in complete denial,” Every said. “The vast majority are saying ‘it’ll be all good, she’ll be fine, don’t worry, it’s all priced in.’ No it isn’t, it absolutely isn’t.”
The central bank mantra that inflationary pressures are temporary is increasingly in question as supplies of everything from semiconductors to coal fall short of demand. Jitters about a stagflation-like shift in the global economy have already hurt stocks and bonds but some strategists are concerned more losses lie ahead.
Global supply chains are “creaking and groaning and straining” and “giving people more money in their pocket or changing interest rates will not physically put more goods on shelves or on tables,” Every said.
Bond-market gauges of inflation expectations are near multi-month highs, and a report later Wednesday is expected to show elevated U.S. price pressures.
“We’re going to continue to see some further upside surprises in inflation and central banks trying to catch up with that,” Ebrahim Rahbari, global head of G10 foreign exchange strategy and markets at Citigroup Inc., said in a seminar. “We will still see more hikes being priced.”
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