Inflation as a Global Phenomenon

Jesse Nacht

September 28, 2022

The traditional approach to explaining inflationary pressures weighs domestic labor markets (closed-end Philips curve) as a major driver of economic growth and slowdown. Currently, FOMC minutes abundantly cite the US unemployment rate as a key factor of inflation. While historical approaches to monetary policy prove tightening policy as an effective solution to ease aggregate demand, the acceleration of inflation is rather a reflection of the global macroeconomic environment.

Consumer Prices, G7 Economies and OECD¹
July 2022, year-on year inflation rate

Source¹: OECD (2022), Inflation (CPI) (indicator). doi: 10.1787/eee82e6e-en (Accessed on 22 September 2022)

Considering inflation from a global perspective is a potentially valuable tool in assessing portfolio positioning. Floating rate bonds reduce interest rate risk by paying a variable coupon based on a reference rate. MarketVector^TM Bond indexes provide access to a specific selection of fixed income indexes including MVIS^® US Investment Grade Floating Rate Index (ticker: MVFLTR). On July 13, 2022, the CPI report released showed inflation was higher than expected and markets reacted instantly. We believe this index can be a useful benchmark and investment tool for global investors during these dynamic times.