The ECB Laments Rates “So Far Away” from Achieving Target Inflation
The ECB raised interest rates by an outsized 0.75% at its September policy meeting while stressing that the end of the hiking cycle was still ”so far away."
A confluence of factors is driving an unprecedented and destabilizing surge in prices across the global economy.
Russia’s invasion of Ukraine and deglobalization—including the reshoring of manufacturing activities and financial decoupling—are leading to widespread inefficiencies, bottlenecks, and a disorderly reorganization of both sprawling supply chains and capital flows.
Underpinned by energy and food-supply shocks, as well as surging wages, inflation has reached levels not seen in four decades. Meanwhile, fading fiscal and monetary stimulus, rising interest rates, and the unwinding of central bank balance sheets have created headwinds for economic growth and aggregate demand.
Worryingly, all these together may bring about an unwelcomed economic dilemma: stagflation, an environment of persistently high inflation and low growth.
Navigating the uncertainty, volatility, and risks of an inflationary or stagflationary market regime will likely be the defining challenge for long-term investors in the years ahead. To make the most of the fleeting opportunities that will arise, allocators of capital will need partners who can pair deep capital-market expertise with a long-term, diversified global perspective. At PGIM, our investment professionals have the conviction of weathering over 30 distinct market cycles by using an active approach across public and private asset classes, regions, sectors, and themes.
A powerful combination of surging inflation and soaring energy prices, along with a war in Europe, may be leading the global economy to a painful economic slowdown. Watch the webinar replay to hear PGIM experts explore the risks, opportunities, and the potential ways investors can build a portfolio to be well-positioned in this complex environment.
Investors may be looking back at the days of disco with a sense of déjà vu. Surging inflation, rising energy prices and the prospect of higher interest rates have sent a ripple through global financial markets – just like they did in the 1970s. In the Season 2 premiere of The OUTthinking Investor, we talk to PGIM experts to better understand today’s inflationary shock and how it will play out for investors.