Why high inflation increases uncertainty

​

High inflation increases uncertainty across financial markets.

​

Rapid changes in prices make it harder for investors to forecast earnings, interest rates and economic growth. This uncertainty often leads to higher market volatility, wider risk premiums and more frequent asset reallocation.

​

Investor behavior may shift toward inflation-hedging assets such as commodities, inflation-linked bonds or real assets. At the same time, risk appetite may decline as financial conditions tighten and recession risks increase.

​

Periods of high inflation are therefore often characterized by unstable market conditions and shifting investment strategies.