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Alberto Matellan argues that inflation remains far more damaging than low economic growth, and should remain foremost in investors' minds. Matellan is chief economist at MAPFRE Inversion, part of MAPFRE, the largest insurance group in Spain and Latin America.
Uncertainty about economic growth seems to have replaced inflation as investors' main concern, despite the fact that the Consumer Price Index (CPI) isn't falling as fast as central banks had expected. Alberto Matellan believes this is a mistake and that investors shouldn't lose sight of rising prices, which are far more damaging to the economy than weak economic growth.
"Low growth is doing less social damage than inflation," Matellan points out, which is why the focus should first be on containing price rises. "Taking care of inflation first and growth second is the right way to go about it. Doing it the other way around means the benefits of improved growth are diluted by inflation."
As far as stagflation goes, the chief economist stresses that it, while not impossible, it's usually a short-lived scenario, as weak growth drives prices down.
This week (ending 12 May 2023) it was reported that the U.S. CPI in April came in at 4.9%, down from 5% in March. Matellan downplays the importance of whether the inflation rate is one tenth above or below the previous month: what's important is the trend, which in turn determines the course of action taken by central banks. "A singl...................... To view our full article Click here
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