Falling infections will help ‘un-kink’ supply chains, doing more to ease inflation in the short term than central bank tightening, according to Invesco’s top strategist.
An encouraging drop in global COVID-19 cases and a higher proportion of the less-severe omicron variant are set to ease supply chain pressures and could even temper inflation more forcefully than central bank interest rate hikes.
“As infections go down, economies can resume normal functioning, employees can return to work, supply chains can un-kink, and spending can rotate toward services and away from goods,” said Kristina Hooper, chief global market strategist for Invesco, a US fund manager. The drop in cases at the global level may even outshine the efforts of central banks around the world to calm consumer price increases, including in the US, where inflation is running at the hottest clip in four decades.
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