Societe Generale On Why It's Now Safe To Ignore Deflation And Start Worrying About Inflation

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It is now safe to ignore the threat of deflation in the U.S., and time to be aware of the inflation that may soon arrive, according to Societe Generale economist Aneta Markowska.

While Markowska does not see inflation of over 2.0% arriving in the U.S. for another four years, she doesn’t caution that there are five imminent signs it is rising.

  • Inflation Expectations: People are expecting it to go higher now
  • Job Market: Actual natural rate of unemployment may be 7.5%, so as job market improve towards 8% unemployment, inflation risk rises.
  • Commodity Prices: Coming through slowly, but on the rise.
  • Import Prices: Rising after years of falling.
  • Service Costs: Housing may be going lower, but rents have already bottomed.
  • Bonus: Public transportation costs rising.

Markowska points out that while we may be through with the deflation fear, there’s no reason for the Fed to now suddenly be frightened of inflation. But if inflation does start to pick up in the U.S., it will only add to the global concerns over worldwide inflation.

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