Investors beware: inflation will return

Central bankers have unleashed unprecedented monetary stimulus in response to the Covid-19 pandemic. For the moment inflation is quiescent. But that won't last.

Pedestrian wearing a face mask on a deserted street © TOLGA AKMEN/AFP via Getty Images
Consumers have been paying down credit-card debt rather than shopping during lockdown © Getty
(Image credit: Pedestrian wearing a face mask on a deserted street © TOLGA AKMEN/AFP via Getty Images)

Central bankers are behaving like “an ostrich putting its head in the sand”, says Charles Goodhart on voxeu.org. The guardians of the world’s currencies have unleashed unprecedented monetary stimulus in response to the pandemic. The US Federal Reserve’s balance sheet has soared by about $3trn since March to over $7trn, more than one-third of US GDP. It could be close to $10trn by year’s end. At £700bn, the Bank of England’s balance sheet is worth roughly one-quarter of Britain’s national income. History shows that “the correlation between monetary growth and inflation” is “as long as your arm”. Yet markets and many economists are strikingly blasé about the risks.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.