BlackRock is the world’s largest asset manager and operates in 30 countries. Its global chief investment officer, Richard Turnill, says US deflation is over and his thinking is, at least in part, based on the relationship between the Institute of Supply Management’s (ISM) Prices index and the US CPI.
Here’s a chart of the two since 2006:
Mr Turnill thinks recent rises in forward-looking surveys such as ISM’s Prices Index will feed through to higher CPI figures, especially as oil prices rise instead of fall in the absence of further shale oil production and factory gate prices are passed on to consumers. He also expects the USD to cease rising against other currencies, which will stop currency-related price falls of imports, while wage rises, which have been modest, are expected to continue to be so.
However, having said that, Mr Turnill still only expects “one to two rate increases this year amid slow U.S. growth.” Mr Turnill still believes the US Fed will be very cautious in raising official rates despite the presence of building inflationary pressures.