Inflation: turning up the heat 

In the case of inflation, time is not on our side. The longer a bout of inflation lasts and the more volatile it is, the more likely it is to become ingrained into society’s collective psyche raising the risk of stagflation1 setting in. Heading into 2022, we viewed stagflation as a relatively low risk given the strong growth momentum seen across much of the world. However, the ongoing conflict and the subsequent sanctions have led to further upwards pressure on commodity prices. The resulting mix of higher inflation and lower growth have raised the risk of stagflation for the medium term, although it is far from our base case of lower yet positive global economic growth and inflation peaking later and at higher levels.2
It is, however, a risk that grows with time, especially if hostilities and the resulting inflationary impulse last into 2023: it will require careful attention given how damaging it can be to investment portfolios.
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We define stagflation as a secular period of weak growth and high inflation.
2 Conflict and Inflation - Global Dynamic Asset Allocation Update - March 2022

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