Is higher inflation going to be the next

18th Dec '24 by N0vice1Nvest0r

6 comments 160 reads

With todays results for inflation showing a slight rise, could inflation be the next black swan event?

Why? Inflation soared after Russia invaded Ukraine, mixed with all the free government money from Covid and furlough.

The reason I wonder if this will be the next black swan, is due to everyone wanting lower rates and even the Bank of England and Bank of America potentially jumping the gun to lower the rates. With inflation slowly rising again, this could lead to a horrendous situation where the BofE and BofA are desperate to drop rates to make mortgages etc more affordable, but are unable to drop rates due to the stubborn inflation.

Hopefully the inflation won't go to the double digits like 2022, but anything above the B of E/B of A targets leads to a struggling economy.

I do believe we get some sort of recession next year, but with stubborn inflation and the inability to drop rates due to the higher inflation, this could cause some serious issues and hit the extremely high S&P500 and FTSE.

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Rusty2

18th Dec '24

Inflation is not a black swan event.

It was predicted, with the Govt. policies it was fairly obvious.

Not everyone wants lower rates, many rely on savings. Many don't have mortgagees or loans.

Quite a jump but most down to fuel prices.

Yes could be a recession partly caused by the Govt.

N0vice1Nvest0r

but if the bank of England want to lower rates, and want to lower inflation. They then cant lower rates due to the rising inflation, and if they lower the rates and ignore the inflation, the inflation will only rise. If they keep the interest rates high in an already struggling economy, mixed with higher inflation then a recession may be the best outcome.

This could however lead to stagflation, or worse, a total loss of confidence in the bank of England/America.

Trump's ideas in the whole are going to lead to higher inflation if implemented in the US. That is an economy whilst strong, will still take a hit if comes to fruition.

Whereas in England the economy is flat, to slow progression at best, with minor investment from outside the Uk.

The black swan isn't necessarily inflation, but how all the options or dealing with inflation become harder to implement. Look across the world, China is struggling, the US is thriving on the outside, but a deeper dive shows that most of the S&Ps rise is in the bubble of 10 companies.

I just get the feeling that everything is topping out in China/US/UK with still the same issues from Covid and the Ukraine war, with all the ways with dealing with these problems running out.

Even if the Ukraine war ends, the damage has been done. This is not meant as a doom and gloom post, but I wanted to post this for reaction and more importantly insight as to why this isnt anything to worry about.

I think inflation will rise anyway, wages and increases in National insurance will push prices up.

Unemployment is rising and l see that continuing. See Shoe Zone (LON:SHOE) update today.

Rising interest, before was crazy as inflation, was caused by high energy prices and food prices, it was not caused by consumers spending.

I don't agree about the US, many stocks are vastly overpriced, l was looking at them on Ed's trending momentum piece, most have fairly low growth, some even negative.

My hope is that whilst the big 10 are overpriced or in a bubble, that should these fall, the rest of the S&P500 catch up.

My problem is you say "inflation will rise anyway" I do agree that Labour policies do appear to be inflationary. Does that mean we should be expecting 2-5% inflation now and into the future?

If that is the case, then surely the Bank of England needs to change its targets...? Like I say this isn't meant as a doom and gloom post, I just don't understand how, if the Bank of England has set inflation targets etc for a stable economy, then why shouldn't we be concerned when these targets aren't just being missed, but could be dwarfed in the long term.

People are talking about 3% inflation, it is no big deal, it is not like when we had 12% and some food prices were doubling. Some food prices should fall. Some items have fallen a bit recently but not by much.

I don't see it causing a black swan event but that is what black swan events are, unexpected out of the blue, 9/11, covid etc. US banks could collapse l suppose.

Logical David

My view at the time upon listening to the autumn budget.... the reason for Rachel Reeves increasing the minimum wage by 6.7% in 2025 was due to the Labour government's expectation that inflation would rise to somewhere near to that level. Hence, I believe Reeves is preempting matters. Time will tell.

Is higher inflation going to be the next "black swan'?

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N0vice1Nvest0r

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