• We saw earlier this month that our global inflation gauge surged to 5.6% in February (based on the inflation rate of 70 DM and EM countries, GDP weighted), exceeding its pre-GFC high of 5.3%.
• Inflationary pressures continue to remain elevated in most DM and EM economies, particularly in the CEEMEA region, leading to aggressive tightening response from central banks.
• Inflation could continue to surprise positively in the near term and the return towards central banks’ target is expected to be delayed by at least half a year (to end-2023 at least) due to the war shock.
• The chart below shows that the CEEMEA inflation surprise index from Citi is standing at a historical high (looking at over 20 years of data).
• On the other hand, the economic activity is expected to slow down quite significantly, leaving risky assets (such as equities) vulnerable in the short to medium term.

Source: Bloomberg/MNI