Is Inflation on Its Way Back to the West?

Shoppers and investors could be hit with higher inflation sooner than they are bargaining for, economists warn.

Inflation across the developed world has been low or non-existent for several years now, but with the U.S. Federal Reserve expected to act soon on interest rates, analysts expect it could take off sooner than forecast.

Stock markets are on tenterhooks ahead of the Fed’s decision on Thursday, when many believe its rate-setting committee under Chair Janet Yellen will raise rates for the first time in more than a decade.

As the west tries gradually to return to normal monetary policy after the global financial crisis, central bankers are trying to emphasize stability and continuity. Many economists agree that the sustained period of low-to-zero inflation is likely to continue.

However, analysts add that the inflation cycle may be hard to control — particularly if commodity prices rebound from their current lows. If consumers take advantage of low oil and food prices, and the consequent extra buying power they have, to get back into the shops, this could also start to push inflation higher, faster.


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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.