Why Nomura Expects "Turbo-Charged Global Inflation"

Economist Lewis Alexander, and his team at Nomura, wastes no time in his latest monthly global economic outlook report - titled aptly enough "Turbo-Charged Global Reflation" to get to the point: "in addition to vaccines and policy stimulus, an economic recovery synchronized across regions will add further impetus to global reflation."

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What follows is a comprehensive and mercifully succinct summary of Alexander's views covering every global region, and justifying why Nomura believes a tidal wave of inflation is about to be unleashed:

United States

  • Democratic control in Washington means more fiscal stimulus, but partisanship and narrow majorities will likely constrain policy.

  • The pandemic will weigh on short-term activity, but the vaccine outlook is positive for the medium term.

  • We expect constant Fed asset purchases through 2021 before a gradual taper in 2022, but risks skew towards earlier action.

  • The Fed will likely stay at the ELB at least through Q2 2023 with inflation remaining the key determinant to liftoff.

  • The unemployment rate will decline more gradually from here as the pace of recovery slows relative to the post-lockdown rebound.

  • COVID-19’s impact on service prices and the impact of labor market slack, particularly on rent, will weigh on core inflation.

  • Notable risks include new SARS-CoV-2 variants along with both upside and downside risk around fiscal policy.


  • With lockdowns still in place we see euro area GDP falling at a similar pace to Q4 in Q1, then recovering from Q2.

  • While underlying inflation remains low, base effects and policy changes should raise headline inflation sharply this year.

  • With GDP rebounding and inflation rising in the short term, we expect the ECB to keep policy on hold this year.

  • UK lockdowns should have a smaller effect on GDP than last spring. A full recovery in GDP takes until beyond 2022.

  • While pent-up demand and policy stimulus should be supportive, we expect a renewed fall in GDP in the current quarter.

  • After another £150bn of QE we think the BoE is done with easing. We do not expect negative rates, but risks remain.

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