As US inflation surges, is stagflation on the way?
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High US inflation is sparking fears of a return to the stagflation of the 1970s, but how likely is it to materialise?
The key takeaways from this Economic Insights are:
- While we expect US inflation to stay elevated next year as growth slows, 1970s-style stagflation is not our base case.
- We expect US inflation to be structurally higher post-COVID-19 than before.
- Stagflation risks are rising from a cyclical view and growing chances of persistent supply shocks.
- A severe stagflation scenario would hurt insurers via weaker premium revenues, higher claims inflation and investment losses.