The end of quantitative easing efforts by central banks could prove a powder keg for inflation levels globally.
Without any historical economic precedent to give an idea of the post-QE aftermath, “this is probably one of the biggest unknowns of today,” he said.
“We are clearly through the worst of the credit crunch aftermath, but as we wind down quantitative easing and inflationary pressures start to build, a dose of stagflation may be the likely outcome.
“This doesn’t have to be that bad as the potential dynamics are nowhere as extreme as those that prevailed in the 1970s.
“But then again, there is a lot more debt around, both personal and government. Small reductions in consumer spending power and small interest rate rises could have a profound effect on consumer behaviour and economic growth.”
