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Will The Deflationary Forces Win Again?

US
  • In the past cycle (prior Covid), we saw that despite the loose monetary policy run by the major central banks, inflation had remained low in most of the developed world, mainly driven by the deflationary forces such as demographics, disruption, debt and globalization.
  • This chart (source: BoA) shows how strongly US births per 1000 women (ages 15-44) times series has led annual CPI rate (5y average) by 25 years.
  • Will the combination of dual monetary and fiscal policies eventually lead to a new inflationary environment, or will the deflationary forces win again pressuring CPI inflation to the downside in the medium to long term?

Source: BoA

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