BlackRock Investment Institute

Macro insights

U.S. vs euro area inflation: a stark contrast

Inflation is rising with the economic restart underway. Looking beyond the restart dynamics, we believe central bank policies will likely be the principal driver of inflation. Here we see a stark contrast between the inflation outlook for the U.S. and that for the euro area.

Contrasting inflation outlooks

US and euro area inflation

Sources: BlackRock Investment Institute, Bureau of Economic Analysis, Eurostat, Federal Reserve, ECB. Notes: The Federal Reserve projections show Q4 annual inflation published in the FOMC Summary of Economic Projections over Q4 2021 – Q4 2023. The ECB projections show calendar-year average inflation rates over 2021-2023.

In the U.S. and continental Europe, the Delta variant will likely reach peak transmission through the summer. Evidence so far suggests the spread in these regions may be less rapid than in the UK; we see vaccines similarly limiting hospitalizations. See the chart. We might see some delays in reopening, but we do not expect the restart to be derailed given the vaccine’s effectiveness.

Studies so far have shown that two doses of the vaccines have greater than 90% efficacy against hospitalization from the Delta variant. This supports our view of a broadening global economic restart.

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Elga Bartsch
Head of Macro Research
Read bio
Nicholas Fawcett
Macro Research

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