© Reuters. FILE PHOTO: Shoppers look at merchandise in the Swatch store in Times Square in New York City, U.S., May 3, 2021. REUTERS/Brendan McDermid
LONDON (Reuters) – BofA expects U.S. inflation to remain elevated for two to four years, against a rising perception of it being transitory, and it said that only a market crash would prevent central banks from tightening in the next six months.
It was “fascinating so many deem inflation as transitory when stimulus, economic growth, asset/commodity/housing inflations deemed permanent”, the investment bank’s top strategist Michael Hatnett said in a note on Friday.
Hartnett thinks inflation will remain in the 2%-4% range over the next 2-4 years.
U.S. Federal Reserve Chairman Jerome Powell on Tuesday vowed to not raise rates not just out of fear of potential rising inflation, a move to soothe investor nerves after a hawkish monetary policy meeting last week.
In the week to Wednesday, investors loaded $7 billion into equities and $9.9 billion into bond funds, while pulling $53.5 billion from cash funds, BofA calculated, using EPFR data.
Within equities, emerging market funds saw outflows of $1.6 billion – the largest since September 2020.