US inflation surge: peak likely passed, but near-term price pressures remain

The US headline inflation figure for June came in at 5.4% year-on-year, the second highest monthly reading in the last 40 years. However, we suspect the surge in prices has likely peaked.

The key takeaways from this edition of Economic Insights are:

  • Supply disruptions and strong demand supported by fiscal stimulus have pushed prices higher this year. But we view the main recent price rise drivers as transient.
  • For inflation to remain elevated, there would need to be persistent wage growth, higher credit creation and/or multi-year policy changes.
  • Market participants seem to share our view that inflation pressures will be higher in the near- than in the medium-to-longer terms.
  • Mid-term, we see inflation reverting to the Fed's target of around 2% but risks are to the upside.
  • Lasting higher inflation would challenge insurers' balance sheets.

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Economic Insights US inflation surge: peak likely passed, but near-term price pressures remain

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