Short of perhaps banks running out of money, nothing strikes fear in the heart of the financial world quite like runaway inflation. Images of children making kites out of banknotes, for instance, continue to traumatise German central bankers nearly a century on. “The best way to destroy the capitalist system [is] to debauch the currency,” observed British economist John Maynard Keynes in 1919 - a quote he attributes to Lenin.

Yet, over the last couple of years, most economies did not worry about inflation even as governments engaged in unprecedented fiscal and monetary expansion to resuscitate economies brought down by the pandemic. With the worst of the crisis over, investors now fear that the karmic retribution for indulging in “magic money” will soon fall upon them.

“It’s not quite the return of the Living Dead but the comeback of an almost forgotten relic from the past could haunt financial markets this year: inflation,” foresee Carsten Brzeski and James Knightly, global head of macro and chief international economist at ING respectively. They see headline inflation in the US and Eurozone overshooting to “levels last seen years ago” of 3% in 2Q2021–3Q2021 and 2% in 2H2021 respectively.

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