PERSPECTIVE3-5 min to read

Economic outlook webinar: Will Covid-19 leave scars on the world economy and how are the debt markets reacting?

Our investment specialists explain why they think the latest pick-up in inflation is temporary – and why they see interest rates remaining low.



Keith Wade
Chief Economist & Strategist
Alex Smitten

Highlights from the webinar:

    • The UK’s latest recession was the sharpest fall in GDP since the Great Frost of 1709, when the country lost much of its agricultural harvest.
    • Both the UK and US are now bouncing back strongly. Inventory levels are low, boosting demand as companies rebuild stocks. Corporate investment also looks healthy, with many businesses looking to upgrade IT systems.
    • Data from China has been strong, but there are clouds on the horizon. The growth in borrowing is slowing and GDP may well follow suit, potentially depressing demand for commodities.
    • We still see the ongoing spike in inflation as temporary. The real driver of inflation is wages. And with plenty of slack in the labour market, we think wage increases will remain under control.
    • We see the Federal Reserve slowing its bond purchases later this year and starting to raise interest rates in 2022. We don’t expect the UK to start raising interest rates until 2023.
    • High debt levels mean that interest rates will have to rise slowly and remain relatively low.
    • Debt-to-GDP in advanced economies is now at the highest level since World War Two, when it was bought back under control through years of austerity. Policymakers are now much more wary of austerity.
    • In advanced economies, government budgets will improve over the next few years – but are likely to remain in deficit. As a result, the stock of government debt will continue to rise.
    • The low cost of debt is keeping the show on the road. In fact, despite the ever-increasing debt load, very low interest rates mean interest payments  have fallen. 
    • Investors will be very focused over the coming months in assessing whether the rise in inflation will be more or less transitory – and what it means for interest rates.

Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.



Keith Wade
Chief Economist & Strategist
Alex Smitten


Economic views
Global Market Perspective
Economic & Strategy Viewpoint

Cazenove Capital is a trading name of Schroders (C.I.) Ltd which is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 2020 and the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended in the conduct of banking and investment business. Registered address at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3UF, (No.24546) . Schroders (C.I.) Limited, Jersey Branch is regulated by the Jersey Financial Services Commission in the conduct of investment business. Registered address at 40 Esplanade, St. Helier, Jersey JE2 3QB, (No.31076).

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.