Inflation can still surprise. And stay high, even in Italy

The predictions oninflation are the most popular in this beginning 2023: the moves of the central banksthe value of household income, the growth of economies.

The latest, in chronological terms, analysis is of some of the greatest asset managers of the world such as BlackRock Inc., Fidelity Investments and Carmignac. Their warning is clear: markets are underestimating both inflation and peak prices US rates, just like a year ago. Pay attention, therefore, to the trajectory of the prices in the coming months: the decline is not obvious.

Furthermore, not very heartening signals arrive even in these hours come on fuel prices in Italy. The leap is record-breaking and this could affect national inflation.

Inflation alert: are the markets underestimating it?

The stakes are immense in the markets after that Wall Street almost unanimously underestimated the trajectory of theinflation. The global actions they saw $18 trillion wiped out, while the US Treasury market suffered its worst year in history.

Still, expectations are once again that inflation will be relatively tame and fall towards the Federal Reserve’s 2% target within a year as money markets bet that the central bank will start cutting rates.

Frederic Leroux, Investment Committee Member and Head of the Cross Asset Team at Carmignacthe French 44 billion-euro asset manager, said it is likely that the shortage of workers it will fuel inflation more than expected.

“Inflation is here to stay”Leroux said in an interview reported by Bloomberg. “After the crisis, central bankers thought they could decide the level of interest rates. In the last couple of years they realized no: inflation can do it.”

Even analysts from the Investment Institute of BlackRock they see high inflation persisting, with little hope that a recession will boost it Fed to cut rates. Instead, they expect the central bank to swap its outsized hikes for smaller hikes.

“Central banks are unlikely to come to the rescue with quick rate cuts to appease recessions designed to drive inflation to policy goals. If anything, policy rates could stay higher for longer than the market expects.”wrote a team of analysts last week including Jean Boivin, head of the Institute.

Fidelity Investments’ global macro director Jurrien Timmer told Bloomberg that inflation remains a key risk to markets, as the Fed has repeatedly made clear it wants to see the measure fall to the 2% target, not just a slowdown in price growth.

Carmignac’s Leroux said the market’s focus on potential Fed pivots it’s a sideshow, as there will come a time when investors realize that inflation is stickier than they thought.

In Italy, inflation can still rise

If on the one hand the latest reading of consumer prices in the Eurozone showed a slowdown, on the other pressures still emerged on core inflation, which does not consider energy and food. The alarm, therefore, is not finished.

And in these hours theItaly is on the alert for runaway fuel costs, which can also have direct repercussions on inflation. The president of Istat explained it to Sky tg24: “This [aumento prezzi carburanti] could represent a big problem in perspective, if things were to go in the direction of continued growth…”

The acquired inflation for 2023 is 5.1%, a percentage that can easily run if the trend in fuel prices worsens to the detriment of consumers. Meanwhile, the Government has met with the Guardia di Finanza to combat any speculation.

This is just one example of how thorny and crucial the issue of rising or slowing prices is. Inflation, sadly, may still have room to rise.