Andrew: Let’s start with inflation. You pointed out recently that US inflation is set to rise from its summer low this year.
Rob: Yes, this is certainly not a time to pop the champagne. Investors always seem to forget about the base effect, which is the reason US inflation is heading back up. Our prediction, assuming modest half-percent inflation per month over the coming months, is that it is set to finish the year between 4.5% and 5.5%. It has already ticked up from July’s 3.2% to 3.7% in August. We are replacing near-zero inflation in the second half of last year with non-zero inflation in the second half of this year. So markets may well find the trajectory of the next few months disconcerting.
Andrew: More broadly, you have done a study tracking inflation in 14 developed economies between 1970 and 2023. What is the key takeaway?
Inflation that has