Title: Increasing Global Inflation and Response Strategies

The short-term cause of inflation is the increase in commodity prices, particularly in agricultural products and more recently in oil prices due to tensions in North Africa and the Middle East. As a result, consumer prices have been rising globally, and inflation expectations are also on the rise. However, the actual causes of inflation, such as unemployment rates and wage growth, are currently very low. Nevertheless, with the current rise in commodity prices, there is a risk of inflation along with wage increases, which could potentially trigger a wage-price spiral similar to that of the 1970s.

Quantitative easing (QE) policy in the US involves purchasing $600 billion in US Treasury bonds, but it has had little impact on inflation and inflation expectations have not increased significantly. This is because most of the funds have flowed into the banking system, leading to an increase in deposits. However, if banks start circulating these funds through loans, it could potentially have an impact on the real economy. In this case, if the central bank is unable to withdraw the funds early, it could lead to inflation.

Emerging markets are a major factor affecting inflation. In the past few years, emerging markets have acted as deflationary factors due to the increase in manufacturing production. However, recently, the increase in prices of raw materials such as energy, food, and metals has led to a shift from deflationary to inflationary factors.

High inflation associated with high levels of debt is one way to reduce debt easily.

A strong growth phase in the economic cycle without inflationary pressures is called the 'global sweet spot' and is considered very beneficial to the market as investors can expect to increase their returns. However, the current rise in commodity prices is threatening this favorable situation by creating inflationary pressures. The increase in raw material prices can lead to significant inflationary problems.

We believe that major advanced markets such as the US, Europe, and Japan have sufficient resources to prevent rising inflation. That is, with unemployment rates not too high and enough resources for business, wages and prices are not rising enough to cause inflation. As a result, inflation is still under control. However, inflation problems are still serious in emerging markets. Emerging countries have fewer resources than advanced countries, so the increase in raw material prices is having a significant impact on inflation, and inflation is continuing to rise. In particular, China's inflation has risen to 5% and Brazil's to 6%. For this reason, central banks are expected to raise interest rates further to control inflation.

The ECB is unlikely to raise interest rates in this situation. This is because they are monitoring whether wage increases occur along with inflation. In addition, they need to consider the problems of neighboring countries, so the ECB needs to coordinate policies for the entire Eurozone. We always strive to manage our customers' funds with new policies and flexible thinking. Thank you