Tags: Vanguard Group | Deflation | Global Economy | Risk

Vanguard Group Officials Say Deflation a Real Risk for Global Economy

Friday, 09 Jan 2015 11:14 AM

Executives at Vanguard Group, the No. 1 U.S. mutual fund company, said deflation is a real risk for the global economy while downplaying inflation concerns for the United States.

"Most people say, 'Hey, deflation, falling prices, isn't that great!'" Vanguard Chief Investment Officer Tim Buckley said during a live webcast.

But as he explained, falling prices are not something to be celebrated, especially in a developed economy that relies on consumption to fuel gross domestic product growth.

As consumers hold off buying things, GDP shrinks.

"Once you're in the cycle, it very difficult to get out," Vanguard Chairman William McNabb added.

McNabb said there are no data that support the presence of a lot of inflationary pressure, especially in the U.S. economy.

"When you look at what drives inflation, wages are the largest component. Most people focus on commodity prices, but wages actually are far more important," McNabb said. "And we have not seen much inflation there."

Buckley, who helps oversee $3.1 trillion in assets under management at Vanguard, said stocks have had a nice run, but bond investors should temper their expectations for 2015 as yields reside at historical lows.

"You can't expect that much return from bonds going forward," Buckley said.

© 2017 Thomson/Reuters. All rights reserved.

   
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Executives at Vanguard Group, the No. 1 U.S. mutual fund company, said deflation is a real risk for the global economy while downplaying inflation concerns for the United States.
Vanguard Group, Deflation, Global Economy, Risk
203
2015-14-09
Friday, 09 Jan 2015 11:14 AM
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