2023-10-26 18:54:00

7 reasons why high inflation may be here to stay, according to Oxford Economics

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MarketWatch
By Vivien Lou Chen

Amid the continuing debate about where inflation is likely to go from here, Jamie Thompson, head of macro scenarios at Oxford Economics, is stepping in with a list of reasons why it could stick around for a long time in the U.S. and abroad.

One big reason is that the longer inflation stays high, the more embedded it is likely to become, Thompson wrote in a note released on Tuesday. While our view is that inflation is likely to recede next year, the outlook is highly uncertain, with evidence underscoring the risk of a more gradual slowing.

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Inflation is likely to remain the No. 1 determinant of whether 2022s wild volatility in stocks and bonds persists into next year. Central bankers and many forecasters remain optimistic and are clinging to the hope that inflation eventually eases, with the consensus view being that it should drop toward 3% or lower in two years. History, on the other hand, shows that it has taken years for inflation to drop below 6% after it spikes above 8%, as it already has in the U.S., the U.K. and the eurozone. Meanwhile, U.S. households are bracing for a greater chance that inflation stays above 4% over the medium term.

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