16 Jan Falling inflation – what does it mean for investors?
Key Points:
- Inflation is in retreat thanks to improved supply and cooling demand. A further fall is likely this year.
- Australian inflation remains relatively high – but this mainly reflects lags rather than a more inflation prone economy.
- Profit gouging or wages were not the cause of high inflation.
- The main risks relate to the conflict in the Middle East escalating and adding to supply costs; a surprise rebound in economic activity & sticky services inflation; and floods, the port dispute and poor productivity in Australia.
- Lower inflation should be positive for investors via lower interest rates, although this benefit may come with a lag.
- The world is now a bit more inflation prone so don’t expect a return to near zero interest rates anytime soon.
