Even a calamity of disease, death and economic destruction afflicting the world all at once isn’t enough to suppress the notion in some quarters that inflation could return with a vengeance.

The coronavirus crisis has killed hundreds of thousands, incapacitated millions and affected the livelihoods of billions -- prompting policy makers to fear a deflation spiral reminiscent of the Great Depression. But economists including former Bank of England official Charles Goodhart, and investors such as BNP Paribas Asset Management, are asking if a different phenomenon lurks in the wreckage of global growth.

Such contrarians wonder if an environment of ultra-loose monetary and fiscal easing, commodity shortages, frayed supply chains and braking globalization might be fertile ground for surging consumer prices. Reinforcing that shift, monetary authorities could face pressure to keep interest rates low, capping the cost of servicing ballooned government debt while allowing inflation to erode it too.

Even some traditionally deflation-wary thinkers have begun pondering that outcome. Former International Monetary Fund Chief Economist Olivier Blanchard recently wrote that high inflation is “unlikely but not impossible,” a sentiment echoed by former European Central Bank policy maker Peter Praet.

“I wouldn’t say that it’s a given that we’re going to be in a longer-term inflationary environment,” said Karen Ward, chief market strategist EMEA at JPMorgan Asset Management. “But I wouldn’t say it’s going to be a negligible probability either.”

A limited dose of inflation might be welcome to central bankers who have spent trillions of dollars over the years in stimulus to achieve that. But such a prospect is far from their minds at present as they try to help economies facing eye-watering increases in unemployment. Almost half of the world’s workforce is in danger of losing livelihoods from the crisis, according to the International Labour Organisation.

“The deflationary shock is dominating, that’s absolutely clear,” Praet said in an interview. “There’s a collapse of demand.”

Markets reflect that view, in tune with the oil slump and the prevailing perspective of weak prices sapped by adverse demographics, new technologies and globalization. Inflation expectations, as proxied by five-year, five-year forward swap rates, are near record lows in the U.S. and Europe. The U.K. 10-year breakeven rate is down nearly three quarters of a point below last year’s peak.

Some investors see things differently. BNP Paribas Asset Management, which oversees more than $450 billion, has started building an overweight position in commodities for the first time in four years, while going underweight bonds. Ardea Investment Management, a Sydney-based fixed income asset manager, said it “materially” added inflation exposure from late March after the collapse in market expectations of price growth.

“In terms of tail risks not being focused on, inflation is definitely one of them,” said Gopi Karunakaran, a money manager at Ardea.

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