US. Retiring Boomers Could Drive An Inflation Shift
Inflation tends to top the list of economic risks that investors obsess most about. After all, runaway inflation has devastated some economies over the centuries. Corralling inflation and keeping expectations well-anchored have been key mandates for most central banks for decades. However, inflation expectations are not uniform across age groups.
Surveys from the New York Federal Reserve highlight the disparity. The over 60 crowd expects inflation to hit a staggering 5% three years from now, while those under 40 think it will be much calmer. While the gap has varied over the years, it has been persistent as those closer to retirement worry that inflation could hijack their nest egg. And of course, those under 40 never experienced the dramatic inflation scare of the 1970’s that was a formative shock for the older set.
But the inflation and demographic influence doesn’t end there. Extensive research from Mikael Juselius of the Bank of Finland and Elod Takats of the Bank for International Settlements provides a compelling case for the link between a country’s age composition and inflation. Their conclusion suggests that the U.S. could be in for a significant inflation shift as its bulge of aging baby boomers retire.
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