Investors should be prepared for biggest inflation scare since 1980s

Prices of other key commodities, such as copper, are hovering at decadal high, while food prices have also been on an uptrend since the last few months.

The markets have been cognizant of the developments and have reacted accordingly. Over the past few weeks, a rise in bond yields, especially in the US, created a flutter in global equity markets on fears of a possible rise in inflation triggered by President Joe Biden's $1.9 trillion stimulus package, who signed the stimulus bill, called the American Rescue Plan, into law on Thursday. The package provides $400 billion for $1,400 direct payments to most Americans, $350 billion in aid to state and local governments, an expansion of the child tax credit and increased funding for COVID-19 vaccine distribution.

Meanwhile, analysts at Nomura, too, share Wood's view and expect inflationary pressures to tighten their grip going ahead. The pickup in recent months, they believe, has been due primarily to higher oil prices. The consensus, they believe, is still under-estimating inflation and will revise their projections higher going ahead.