The traditional approach to explaining inflationary pressures weighs domestic labor markets (closed-end Philips curve) as a major driver of economic growth and slowdown. Currently, FOMC minutes abundantly cite the US unemployment rate as a key factor of inflation. While historical approaches to monetary policy prove tightening policy as an effective solution to ease aggregate demand, the acceleration of inflation is rather a reflection of the global macroeconomic environment.
Consumer Prices, G7 Economies and OECD1
July 2022, year-on year inflation rate
Source1: OECD (2022), Inflation (CPI) (indicator). doi: 10.1787/eee82e6e-en (Accessed on 22 September 2022)
Considering inflation from a global perspective is a potentially valuable tool in assessing portfolio positioning. Floating rate bonds reduce interest rate risk by paying a variable coupon based on a reference rate. MarketVectorTM Bond indexes provide access to a specific selection of fixed income indexes including MVIS® US Investment Grade Floating Rate Index (ticker: MVFLTR). On July 13, 2022, the CPI report released showed inflation was higher than expected and markets reacted instantly. We believe this index can be a useful benchmark and investment tool for global investors during these dynamic times.
MVIS® US Investment Grade Floating Rate Index
9/27/2021-9/27/2022
Source: MarketVector IndexesTM. Data as of September 27, 2022.
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About the Author:
Jesse Nacht is an Index Research Associate at MarketVector Indexes GmbH. Jesse’s core responsibilities include assisting in the design and analysis for the development of MarketVector. He holds a FINRA Series 57 Securities Trader License having come from a trading background. Jesse has an MA in Economics and Finance from Brandeis University’s International Business School and a BA in Economics from Brandeis University.
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