Inflation - a rather complex indicator, which strongly affects all market participants and the economy as a whole - for AMarkets materials.
When consumer inflation steadily declining, we can expect that interest rates will fall, corporate profits will grow.This is because the cost of debt is below. Companies successfully optimize their costs, revenues against a background of low inflation. At the same time, investors are beginning to buy stocks as margin lending cheaper, profitability indicators are rising. Political risks are falling. The budget deficit has stabilized. When inflation is low forecast future costs, including future loans, it makes things easier. GDP is growing faster.
All of the above is significantly enhanced if the economy is growing and inflation decline - this is actually the first such episode in a developing economy. Of course, low inflation - it's not a panacea, and it is not due to make an incredible economic miracles. But if the investor pays attention to the factor of inflation, it can confidently manage their portfolio yield on long-term segment. But inflation - it is also very difficult to analyze the light. Most of the countries defeated hyperinflation in the last 25-30 years - when everything is growing against the background of strengthening the global position of China. Other factors hindering forecasting future inflation - the transition of state companies into private hands, the development of international trade.
Simply put, can not just take and compare the dynamics in annual inflation to the dynamics of the local market index to judge the inverse correlation. If we assess the country where the drop in inflation - it is the first episode in the history of (America P.Volkera times), the subsequent effect on the economy produced by, for example, may be erased due to very strong growth in the stock index.
According to Greenspan, the blowing up of the market bubble has always arises in the long term GDP growth and low inflation.
The bottom line - all very difficult. However, it is clear that central banks are seriously mistaken when they think that they can influence the bubbles using monetary injections.