SSGA: Technology, demographics and debt are powerful constraints to high inflation

SSGA: Technology, demographics and debt are powerful constraints to high inflation

May 18, 2021

Inflation
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State Street Global Advisors (SSGA) sees upside risks to inflation in the short term, but highlights that inflation is a process, not an event. “Although we see incipient shifts that could push us into a higher inflation regime over time, it is not yet clear if something systemic is changing the inflation process itself,” said Simona Mocuta, Senior Economist at SSGA.

There are several trend shifts that suggest that the inflation process itself might be sustainably altered. The challenge, however, is that these changes are too recent to be confidently extrapolated into the future. Moreover, many are also subject to political risk that could either slow or accelerate them in coming years.

Simona lists some inflationary forces that she considers as indicative of an inflection point relative to the past fifteen years:

  • A new, more experiential approach to macroeconomic policy (AIT/Modern Monetary Theory combo)
  • Equity and inclusion as stated macroeconomic goals
  • Shifting global supply chains/peak globalization
  • Transition to a green economy
  • Inflation expectations

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