View from City Road: Just another Seventies revival?

Click to follow
The Independent Online
What's this? Oil prices on the up, the dollar in trouble, and coffee more expensive than tea for the first time since the Labour Party was last in power. Has the clock turned back two decades?

Fortunately not. A prolonged re-run of 1970s-style price inflation looks about as likely as a permanent return to the dark days of flared trousers.

Fundamentals may be pointing the way, but recent price rises are overdone. The whiff of hot money seeking a more profitable home than the dismal bond or equity markets is unmistakable.

The reaction of the coffee price - up 77 per cent in two weeks - to a very bad Brazilian frost, looks overdramatic given the as-yet-unquantifiable effects of the cold snap and the probable slowing of retail demand as prices rise.

Just as good news in a speculatively driven market pushes the price up to unjustifiable heights, bad news can have an equally dramatic depressant effect.

Comments