SCHQ - Deflation First

• In the past few months, the surge in commodity prices has led to rising concerns over an unexpected rise in long-term inflation expectations.
• Most of participants are expecting higher global CPI prints in the month to come.
• However, the pre-Covid-19 symptoms (demographic, disruption, low interest rates) have not changed, and the debt is now significantly higher.
• In addition, social distancing norms and travel restrictions are expected to remain into place for another 2 years.
• Liquidity may continue to stimulate asset price inflation, but 'real economy inflation' may remain at depressed levels in the coming months.

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