Our research series on the strains pressuring global supply chains included a framework with which one could assess the outlook for inflation on goods prices. It continues to show a moderation in U.S. prices as demand cools and supply improves.
- Yet, that story is only part of the global inflation narrative. The emergence of two global supply shocks—Russia’s invasion of Ukraine and China’s renewed zero-COVID lockdowns—pose significant challenges to European supply and demand.
- Therefore, in the latest edition to our research series, we progress through Five Points to analyze the implications of these supply shocks, extend our framework to the Euro Area, compare its performance to that in the U.S., and assess the ramifications of these findings on the outlook for inflation and the fixed income markets.
- Our conclusions point to some relative value opportunities in rates markets as well as indicating a view on exposure to the credit markets.