To Avoid Recession in 2023 Inflation May Run Higher Than Targets

By Shubhendra Anand, 31 May, 2023

Central banks are expecting to settle for the inflation that’s higher than the 2 percent targets as per ta majority of fixed-income investors in the Bank of America Corp. survey.

According to the reports, two-thirds of the respondents in a survey conducted in April said that policymakers will also accept price growth of 2 percent to 3 percent. All these if it means to avoid recession when compared to 42 per cent in poll of March. The are also supposed to stomach even higher inflation of 3 percent to 4 percent.

The reports also find out that the bond investors are re-evaluating the path for markets after the recent turmoil in the sector of banking. The strategists are of the view that the investors are showing concern that inflation cannot just remain sticky. On the other hand, the central banks could be forced to also accept higher inflation going forward.

The survey says, only 19 percent of respondents can see central banks to pursue 2 percent inflation at all costs, around half the level in March. BofA conducted the survey in April 2023 and received responses from around 69 global fixed-income fund managers. After the failure of three US banks and the rescue of the Credit Suisse Group AG last month, the respondents to this survey saw the financial stability along with sticky inflation as the joint biggest threats.

Thus, the sovereign bonds of the developed market are supposed to be the best performing assets class over the next three to six months followed by cash by retaining their lead from the last survey.

Inflation Higher than Targets to Avoid Recession
The image shows inflation may run higher than targets to avoid recession

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