The Inflation Bug by Adit Jain

We expect the US dollar to gain in value against a basket of global currencies, as higher inflation in America will force policy makers, in its central bank, to keep a hawkish stance on interest rates. With higher yields, therefore, capital will be attracted back to lower risk returns offered in the US treasuries, with a consequent sell off in emerging market bonds and equities. Moreover, The S&P 500 index, which tracks the stock performance of 500 of the largest companies listed on stock exchanges in the United States, fell from around 6100 in end January 2025 to 5800 at the beginning of March.

Inflation, which the United States Federal Reserve assumed had been tamed, has demonstrated a new spark of energy and seems to be edging upwards again. So, the interest rate cuts factored in, previously by markets, are now open to question. It’s a double whammy. In January America’s “core” consumer-price index, which strips out volatile food and energy costs, jumped by 5.5% at an annualised rate.

This podcast explains.