In our Q3-2022 Economic Research Report, we examine the economic landscape for the next three to five years. Key points include:
• Emphasis on sustaining the negative "money-price-wage spiral" through restrained fiscal and monetary policies until at least the end of Q1 2023.
• Analysis of three narratives potentially driving sustained inflation: deglobalization, energy shortages, and labor shortages, and how these relate to supply and demand dynamics.
• The importance of not stimulating demand alongside supply shocks. A supply shock alone causes an inflation spike but not sustained inflation.
• Recognition of the potential for sustained inflation arising from both supply limitations and increased government control of credit. However, this shift is more a political forecast than an economic certainty.
In conclusion, the report advises maintaining the current "money-price-wage spiral" through policy restraint. It highlights that supply shocks will lead to reduced demand unless fiscal and monetary authorities coordinate stimulus efforts. The transformation into a command-and-control system remains uncertain in the immediate three-to-five-year view. Without such a shift, the natural downward pressure from reduced demand is expected to counteract inflation.
We look forward to sharing further insights in our next quarterly presentation.