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Inflation Spike Ahead ?

In the last six months, the US 10-year bond yield has risen to 4.8% from 3.8% despite a 1% rate cut during the period. At the same time, the dollar index is up from 100 to 110. This surely has an element of upcoming trade and geopolitical issues, but is it also now factoring in inflation rising again? 


Since March 2024, inflation has reduced from 3.5% to a low of 2.4% in September, but since then, it has come back to 2.7%. Within this period, food inflation has risen monthly for the last three months. Even natural gas prices have doubled since September 2024.


Though prices were higher in February and May, the yearly impact of the rising trend would not be a concern. If prices, especially in food and energy, rise further, then it will surely cause inflation to become a major risk. 


It is important to monitor upcoming trade and geopolitical developments as they will cause the cost inflation further resulting in corporates to rise the prices again. The current level of concern regarding inflation spike is low but if it increases with time ahead then the volatility is also likely to rise.

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