Where has all the inflation gone?

Where has all the inflation gone?

Errors in forecasts are nothing new, but Steven Bell, manager of the F&C Global Macro Bond fund, asks why economists have been so far off the mark with their inflation forecasts in recent months.

Recent developments in unemployment and inflation have puzzled economists in the UK and the US. Solving the puzzle is arguably the biggest macro challenge facing investors currently. It holds the key to the timing of interest rate hikes by the Federal Reserve and the Bank of England, and affects the prospects for bonds and equities. Economists struggle to make accurate forecasts but are normally much better at explaining the past. Yet developments in inflation and unemployment in the UK and the US this year have challenged even the most creative members of our profession. Unemployment...