How big is the inflation threat really?

Is inflation as much of a problem as recent data suggests? Jeremy Batstone at Charles Stanley isn't so sure. He looks at the underlying inflation picture in each of the major global economies and asks whether the increasingly hawkish stances of the world's central banks are justified.

A great deal is being written regarding the extent to which the markets are being driven regarding inflation fears and rising base rate expectations. Yet we remain convinced that inflation is not as much of a problem as investors and Western central bankers believe it to be.

Despite the prolonged period of global economic expansion, inflation remains remarkably low by historical standards, despite the recent surge in energy prices. In large part, as we have argued, this is down to the dramatic surge in the global supply of goods caused by the emergence of China as an economic force. This in turn is helping to keep labour costs under control, boosting productivity.

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