Inflation: Why piggy banks won’t fly
Global economic growth is good news for investors, but it brings inflation with it which can have consequences for savers.
2 min read
Prices are rising across the globe thanks to a growing world economy. Controlled inflation rises bring benefits but inflation is actually the stealth enemy of your wealth – especially if you’re sitting on cash.
Inflation accelerated in the US and Europe last week while remaining steady in the UK and Japan. A key point that came through for us was that the numbers underlined an ongoing shift in economic growth that started in the first quarter of this year.
Here’s what we learnt:
- US growth remains strong but is de-coupling from the rest of the developed world where economic expansion is cooling to more normal levels
- The European Central Bank announced that its bond buying programme would end in December as the region is now strong enough to operate without ongoing intervention
- The Bank of Japan made no changes as it continues to assess the reasons for weaker growth
- UK inflation stayed at 2.4%, with its downward trend halted by hikes in the cost of crude oil
Coutts Head of Investment Strategy Sven Balzer explains, “The US continues to soar, spurred on by President Donald Trump’s tax reforms, while the other developed regions of the world return to more normalised growth figures.
“The US is such a large and influential market its success is good for markets across the world. Partly thanks to the country’s current strength, we still see no sign of a recession that would herald a significant downturn for at least the rest of this year, possibly longer.”
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