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Is inflation hotter than the market will admit? Bond panel can’t quite agree

Bond market decision-makers, including BlackRock’s Rick Rieder, have quite a mixed view of inflation risks. Their divide is tied to a puzzling U.S. economy in turn boosted by technology muscle and rising wages but dragged down by high debt levels and global risks.

Sonal Desai, director of research for Templeton Global Macro, told the Morningstar Investment Conference on Friday that she thinks investors are too complacent about the risks of inflation. Inflation, she argues, could well hit 3% this year, driven by wages and proposed tax cuts, although potentially limited by immigration tightening. That’s above the Federal Reserve’s target of roughly 2% and is significantly above where market expectations sit, she said.

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