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Western Asset: Will inflation finally turn up in 2021?

Key Takeaways:

  • While we do concede that a rise in inflation is more of a possibility at present than at anytime over the past 40 years, we’re not convinced it is inevitable or even likely.
  • We believe a confluence of factors need to be present—not simply very low interest rates and stimulus—for a sustained rise in inflation to occur.
  • Our view is that the increase in the money supply engineered by the Fed, with help from Treasury, has been fully offset by increasing money demand.
  • Stricter banking regulations limit the effectiveness of monetary policy, which we cite at the best reason to think that inflation will remain contained.

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  •   1 April 2021
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