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A closer look at inflation and the “price rally”

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Inflation is caused by the intersection of supply and demand. Before COVID ‑ 19 came into our lives, it was clear that supply exceeded demand in many parts of the world – and there were no incentives for strong inflation. We had a lot of energy, a lot of work and not enough growth. Technology opened up potential in every sector, which had a deflationary effect. Add to this the fact that demographics have changed – with declining populations – and debt is high, and it becomes clear why the rise of inflation has been a challenge for the world economy.

“Shock on top of shock”

The Russian-Ukrainian conflict creates additional complexity

For illustrative purposes only.

The worldwide spread of COVID ‑ 19 has had a huge impact on supply and demand. In terms of demand, the US Federal Reserve has taken extraordinary measures to stabilize the global economy by lowering the Fed rate to 0% and deploying large-scale monetary stimulus to support the global economy, which would otherwise face serious challenges. The Fed effectively maintained the risks. Private investment, venture, cryptocurrency and emerging technology companies have received unprecedented capital flows. Extreme estimates have emerged for the most speculative areas and they are now relaxing, putting pressure on stock growth. Elsewhere, governments have transferred cash to private sector savings and investments.

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