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Max ANDERL, Head of Concentrated Alpha Equity at UBS Asset Management, tackles the factors commonly believed to drive inflation and explains why it could be short-lived.
A shrinking labour force should lead to a rise in inflation, right?
Based on the law of supply and demand, one would assume that a lower labour supply should drive higher wages, which should in turn lead to higher inflation. History, however, has taught us that this is not the reality. Empirical evidence shows that we have only had one period of significant inflation in the past and that was from the 1970s to 1980s. For over a decade the pool of available workers rose sharply by 8% every year as the post-World War II baby boomers had become of age. Naturally then, one...
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