Tailwind in 2019: Global Inflation

Around the Curve

Tailwind in 2019: Global Inflation

Low inflation and disciplined central banks in much of the world is especially good news for emerging markets.

Chart of the Moment

This chart is one of the reasons why we remain constructive regarding the prospects for stable global growth in 2019:


Source: Brandywine Global. Please see below for definitions of these abbreviations. Past performance is no guarantee of future results. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.


The world doesn’t have an inflation problem, so central banks can quickly inject monetary stimulus if conditions warrant it. In particular, emerging market central banks should be able to focus more on their inflation mandates—or the lack thereof—now that there are signs of stability in their currency markets.

Barring outliers like Turkey—and on the other side of the spectrum—India and Japan, inflation rates look to be within many central bank targets. Emerging market central banks in particular did a stellar job in 2018 targeting policy to either keep up with rising rates in the U.S. or address persistently high inflation rates. Banco de Mexico, South Africa Reserve Bank, and Bank Indonesia all swiftly introduced prescriptive policies to address respective inflation-related issues within their respective economies. Even the Central Bank of the Republic of Turkey eventually raised a key policy enough times to appease market expectations.

We expect this responsiveness from emerging market central banks to continue while the Federal Reserve retreats from its hawkish stance.



Inflation is presented as measured in the countries with the following currencies: INR, Indian rupee; THB, Thai baht; JPY, Japanese yen; PLN, Polish zloty; CHF, Swiss franc; CNY, Chinese renminbi; ILS, Israeli shekel; IDR, Indonesian rupiah; AUD, Australian dollar; BRL, Brazilian real; CAD, Canadian dollar; RUB, Russian ruble; NZD, New Zealand dollar; EUR, Euro; KRW, Korean won; SEK, Swedish krona; CZK, Czech koruna; HUF, Hungarian forint; USD, United States dollar; GBP, British pound; ZAR, South African rand; ISK, Iceland krona; NOK, Norwegian krone; MXN, Mexican peso; PHP, Philippine peso; TRY, Turkish lira.



IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.

Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

The opinions and views expressed herein are not intended to be relied upon as a prediction or forecast of actual future events or performance, guarantee of future results, recommendations or advice.  Statements made in this material are not intended as buy or sell recommendations of any securities. Forward-looking statements are subject to uncertainties that could cause actual developments and results to differ materially from the expectations expressed. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. Information and opinions expressed by either Legg Mason or its affiliates are current as at the date indicated, are subject to change without notice, and do not  take into account the particular investment objectives, financial situation or needs of individual investors.

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