Key Highlights

  • Morgan Stanley says inflationary pressure beginning to escalate
  • Such thinking counters emerging consensus that looming global recession would deepen disinflation trends

Here are four terms real estate agents ought to know in order to better communicate economic and market trends with your clients:

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  • Deflation translates into negative growth rate or when prices begin to drop
  • Inflation translates into positive growth rate or when prices begin to escalate or increase
  • Disinflation is commonly used by the Federal Reserve to slow the rate of change in inflation or rising prices
  • Reflation happens when a government stimulates the economy by increasing money supply

For the last 30 years, disinflation, or slowing the rate of price increases, has been held in check. Now, with the central banks slashing interest rates and ramping up bond buying and the government kicking in +$8T in stimulus packages to cushion COVID’s economic blow, policy makers may have to reorganize monetary easing.

Chetan Ahya, chief economist and global head of economics with Morgan Stanly, said, “For the first time in a decade, we are finally getting coordinated monetary and fiscal easing – a policy dynamic that we have viewed as essential to get out of the low-growth, low-inflation loop. The scale of easing is also unprecedented during peace time.”

Will the return of accelerating inflationary pressure overshoot central bank targets? Such efforts to contain the COVID spread may in fact exacerbate inequalities among the rich and poor.

Morgan Stanley’s viewpoint stands alone in a consensus that sees disinflation trends deepening. However, Ahya’s view is firm. “We see the threat that inflation emerges from 2022 and will overshoot the central banks’ targets in this cycle. The driving forces of inflation are already aligned and a regime shift is under way. The near-term disinflationary trend will quickly give way to reflation and then inflation.”

Thanks to Seeking Alpha and BloombergNews.

Also read: Podcast: Todays Top Real Estate News Headlines | Tim and Julie Harris, Podcast: Big Boom In Housing Sales Coming Soon!, How Has Covid-19 Already Impacted the Real Estate Market?