'Trumpflation' is a sure thing; Europe may even rebound

London

ECONOMIC pundits traditionally offer their (traditionally inaccurate) New Year predictions at the beginning of January. But global conditions this year are anything but traditional, so it seemed appropriate to wait until US President Donald Trump settled into the White House to weigh in on some of the main surprises that might shake up the world economy and financial markets on his watch.

Judging by current market movements and conditions, the world could be caught off guard by three potentially transformative developments.

For starters, Mr Trump's economic policies are likely to produce much higher US interest rates and inflation than financial markets expect. Mr Trump's election has almost certainly ended the 35-year trend of disinflation and declining rates that began in 1981, and that has been the dominant influence on economic conditions and asset prices worldwide. But investors and policymakers don't believe it …