GLOBAL - Inflation is unlikely to be a threat in the short term due to the current levels of economic growth and the government policies implemented around the world, the latest global economic research by Baring Asset Management (BAM) has revealed.
The firm said this, coupled with continued "super-easy" monetary policy and slow growth, suggested that while the prospect of a tepid recovery remained intact, economic conditions were unlikely to normalise until the latter part of 2010.
BAM director of asset allocation Andrew Cole said: "We had been expecting the first tightening moves during the first half of 2010, but with economies still running well below even their reduced potential levels next year, even the second half looks far from certain.
"Recent data in the US, Europe and the UK shows credit formation in the private sector remains negative and this might well cause further tranches of quantitative easing to be released."
Cole added bond markets would benefit from a delayed pick-up in inflation. And equities would also benefit from strong savings flows into the asset class as well as from a potential uptrend in corporate profits.
In addition, BAM said to be skeptical of a normal recovery path out of recession, which would typically see "five to six quarters of growth at around 5% to 6% in GDP annualized terms".
This would be constrained by personal balance sheet issues, while the weakness of bank balance sheets would curb lending, it added.
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