Prepare for lacklustre inflation, cautions top PIMCO investor

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Last month, the US recorded its biggest burst of inflation since 2008 with a 4.2 per cent annual increase in April. In Australia, consumer prices increased 0.6 per cent in the March quarter, short of analyst forecasts, but a tide of anecdotal evidence has investors on edge.

“Because of this significant, uneven reopening of the global economy, there are going to be significant supply and demand imbalances. In fact, more recent inflationary pressures have been in areas that we’re pretty confident will be transitory,” he said.

Excluding food and transport costs, notable drivers of US inflation this year have included airline tickets, hotel expenses and used cars. These are precisely the types of areas that will quickly settle in the coming quarters as the economy begins to take its pre-pandemic shape.

In March, PIMCO warned that an inflation “head-fake” could sweep the market, wrongfooting investors but also offering a chance to buy assets like…

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