Inflation may return with a vengeance, warns Christof Ruhl, former group chief economist of BP.

Speaking at a private dinner conference in London, Ruhl was responding to concerns raised by a prominent figure from the shipping industry about the potential impact of inflation on interest rates for such a capital-intensive sector requiring large tranches of finance.

The Connaught Hotel gathering was the first in a series planned by Geneva-based Pictet Wealth Management and TradeWinds to provide leaders of the commodity and shipping industries with insight about geopolitics, economic trends and other topics.

TradeWinds editor-in-chief Julian Bray moderated the event, which also included presentations from Neil Atkinson, head of the International Energy Agency's (IEA's) oil industry and markets division, and Pictet Wealth Management global strategist Alexandre Tavazzi.

IN GOOD COMPANY

The guest list included local industry luminaries such as Professor Costas Grammenos (left), founder and chairman of the Costas Grammenos Centre for Shipping, Trade and Finance at the Cass Business School, pictured here with moderator Julian Bray, editor-in-chief of TradeWinds.

During the dinner discussion Ruhl, former global head of research at the Abu Dhabi Investment Authority and group chief economist at BP, emphasised the significance of rising wages and full employment in a growing number of nations.

He noted the prospect of higher inflation coincides with levels of household, government and business debt that are at or above those seen during the great financial crisis of 2008 and 2009.

Ruhl conceded that this is a particularly difficult problem to tackle in an environment characterised by lower central bank policy rates and diminished inflation expectations.

THE CONNAUGHT HOTEL

The private dinner-conference, the first in a series planned by Pictet and TradeWinds, took place at The Connaught, one of the oldest 5-star hotels in London. Features include a Michelin-starred restaurant run by legendary French chef Hélène Darroze.

“We also see a whole generation of people in business who have never lived through high inflation,” he continued.

“Many businesses have taken out cheap loans with debt instruments that could not withstand any rapid tightening. This could get further out of hand if monetary authorities are loathe to tighten rates too fast.”

While speaking about long-term economic trends and the impact of various geopolitical developments on energy markets Ruhl reminded the audience that increased competition, globalisation and the free movement of goods has muted inflation in recent years.

Long-term economic growth has slowed too, particularly in advanced economies, which translates to declining rates of return.

Likewise, apart from the great financial crisis, Ruhl noted that volatility has calmed considerably since the 1970s because we now live in what he described as a “globally integrated economy”.

Pictet Perspectives

For more insights from the dinner conference check out "IMO fuel regulations 'challenging but manageable'" featuring commentary from Neil Atkinson, head of the IEA's oil industry and markets division.

Presenter Alexandre Tavazzi, global strategist at Pictet Wealth Management, shares his perspectives about trends shaping shipping and commodity markets in “The reign of uncertainties”.