Robeco inflation monitor: inflation tensions ease

Underlying inflationary pressures have moderated during the past couple of months.

Underlying inflationary pressures have moderated during the past couple of months. On the one hand, this is linked to the weaker economic data published recently, indicating that the industrial sector is taking a breather. On the other hand, following the strong spike in commodity prices up to May, commodity prices have declined substantially. Especially the important oil prices have dropped significantly, bringing the oil back to the level of the start of the year. With some delay, this decline will result in somewhat lower inflation moving forward.

As for the Emerging Markets, even though inflation is still on the high side, the most recent data published – with the exception of Chinese inflation which rose to 5.5% – show that no further deterioration has taken place. Some fear that the high inflation in Emerging Markets will spill over to the Western world. Although this threat is potentially there, as long as the Chinese yuan (and other currencies of Emerging Markets) continue to decline versus the euro, as they have done during the past 12 months, this is more a threat for the US economy and not for the Eurozone.