Despite the unwelcome return of Covid-19 to Singapore’s shores, things are looking up for the global economy as a whole. This recovery has naturally seen fears of inflation perking up, with US 10-Year Treasury yields sharply rising from near-zero levels last year to around 1.63% as of May 17. US markets are thus increasingly shifting into value plays to hedge against this reflation as talk of a “taper tantrum” is fearfully whispered among investors fearing an interest rate hike.

For ESSEC Business School’s associate professor of economics Jamus Lim, however, such fears are largely unfounded. He notes that while inflationary pressures are indeed rising with economic recovery, they remain relatively quiescent for now and close to the targets set by central banks. Wage inflation has been relatively limited thus far, while money supply growth — the main inflation risk this round — has already begun to taper.

Currently, inflation expectations in global markets with exception of the US are just returning to pre-pandemic levels. US markets, however, are pricing in inflation that exceeds Federal Reserve (Fed) targets.

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