Global Matters Weekly – This time may be different

“As violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” Ronald Reagan’s caricature of inflation in 1978 reflects a degree of fear at the time about this pernicious thief that is largely absent amongst today’s policymakers. After several decades of low inflation, policymakers and investors have potentially become too complacent about the risks of higher inflation. Although there remains a wide range of potential outcomes in the coming years, we see a return of higher inflation as the biggest risk factor in markets; it would erode purchasing power, damage the real value of savings and wealth, and would have far-reaching implications for the construction of portfolios.