Hermes' Parry: Europe needs low inflation

Central banks' juggling act in trying to stimulate inflation but cool inflated asset prices is causing "schizophrenic" policy decisions in Europe. The trouble is, low inflation is necessary, argues Andrew Parry from Hermes.

Dutch bond yields hit a 500-year low recently and across Europe other countries saw yields hit multi-century lows too. Should managers be elated or fearful? Many were calling the start of a ‘great rotation' early last year, as investors anticipated a stampede out of lowly yielding bonds into more exciting equities while the global economy recovered. To be fair, the argument was largely put forward by perennially optimistic equity managers who had suffered years of outflows in favour of bond investors. Despite these clarion calls, 10-year bond yields globally continued their downward t...