How policy uncertainty is hindering positive developments for bonds

Concern over central bank actions

The outlook for global inflation is complex. The agreement among members of the Organisation of the Petroleum Exporting Countries (OPEC) to effectively increase production by one million barrels per day coincides with rising US shale oil production, and should mean the tailwind to global inflation from oil prices starts to dissipate.

In China, a crackdown on shadow banking activities has kept monetary conditions tight and inflation low. Historically, that has tended to be a disinflationary force for developed world inflation as the price of Chinese exports remains stable.  Counterbalancing these forces, however, is growing policy uncertainty. This comes just at the point where developed market central banks are starting the process of removing the unconventional monetary policy measures implemented following the global financial crisis.  'Draghi will be asked some tricky questions on Italy': Commentators divided o...