The Strategist

Credit Suisse analysts forecast end of low inflation era

09/02/2022 - 11:08

According to experts at Credit Suisse, the era of low global inflation that was fueled by inexpensive exports from China and Russia may soon come to an end.
Due to the breakup of China's economic alliance with the US and the European Union's economic partnership with Russia, the era of low inflation around the world may finally be coming to an end, according to a report from Credit Suisse's investment strategy department.

The investment bank experts believe that three factors contributed to the period of low inflation around the world: inexpensive immigrant labor, which maintained the level of nominal wages in the United States, inexpensive Chinese goods, which increased real wages while nominal wages stagnated, and inexpensive Russian natural gas (which provided growth in European industry).

Trade and financial cooperation benefited the partners in both alliances (China-U.S., or Chimerica, and Russia-EU, or Eurussia), however both alliances are no longer functional due to differences.

The experts think that new economic coalitions are forming on a global scale. The first of them is the partnership between China and Russia, when the largest raw material provider joined forces with the "factory of the world." Countries subject to U.S. sanctions, including Turkey, Russia, Iran, China, and North Korea, have formed another, larger alliance (TRICS, or TRICKs). They are merging both economically and militarily.