Inflation and money supply growth predictions 2022-23

An above-average growth fueled by productivity gains is expected from this year onwards. Over the next few years, major economies, in general, will witness lower profits and an increase in wages. This increase in wages due to changing demographics will ensure growth in consumer demand.

This will also account for growth in automation and AI.

Inflation persists if Excess demands are met by a sufficient increase in the money supply. Commercial banks try their best to mitigate the business impact and increase the money supply when the interest rate rises. Interest rates are increased to reduce demand for mortgages, loans, and credit.

The consensus is that the base rate, money supply growth, and inflation is expected to be around 1.5%,4-5%, and 2% respectively by end of 2022.

The current global inflation rate is 80% due to excess money and 20% due to supply shortages. As the wall of money flows faster around the global ecosystem, the inflationary surge will continue.

Governments have unsuccessfully tried to reduce inflation without reducing growth using price and wage controls in the seventies.

There is a threat of a wage-price spiral due to competition among employers fueled by scarce labor.

A recession or sharp slow-down is required to control it by getting the red line to near zero and an interest rate of at least 3%.

The housing market is expected to be unaffected by the increase in interest rates this year. This is due to a low percentage of floating mortgages and significant cash reserves with the holders.

US money is flooding in, and Lloyds Banks is looking for Buy-to-let assets.

A weaker Euro currency is expected along with no change in Euro interest rates since the ECB is maintaining the stimulus till the end of the year.

A planned surge in investment spending this year is indicated by the surveys. Even though we have willing investors, there is a shortage of people and materials.

Canada, France, Germany, Italy, Japan, the UK, and the US constitute the G7. US investments were held back by referendum and associated uncertainty. Even though total money spending will increase by 10%, real growth will be 3.5% due to inflation at around 6.5%.

Net surplus on services has improved for the UK, though at the cost of an increased net deficit on goods. Overseas investors buying UK property and companies are financing the trade deficit.

According to IMF forecasts, the UK may grow faster than G7 in 2022.

Excess money has enabled early retirement and choked the supply of labor due to an increase in the wealth of land and equities owners by 10% in rich countries. This is worsened by the collapse of the birth rate in 2000.

As inflation runs ahead of interest rates, the real cost of debts would fall.

Inflation and the global boom are caused by 17 Trillion $ excess money chasing scarce resources.

Since QE would have ended everywhere by 2023 and purchasing power of existing money would have been eroded, inflation rates are expected to balance out by then.

Due to the recovery of the service sector and scarce resources, a wage-price spiral appears likely.

Due to the anticipated surge in investment spending by businesses and governments, an inflationary boom may appear likely till 2023