Mintos Insight May 2023: The inflation monitor Q1

Welcome back to another edition of Mintos Insight. Going forward, we’ll be checking in on inflation on a quarterly basis. With the inflation monitor, we’ll analyze trends in major economies and provide insights into the economic outlook.

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United States
United Kingdom

Analyzing inflation trends in major economies

The increase in energy prices was already contributing to inflation in many economies, even prior to the war in Ukraine, and the situation only worsened as Europe was forced to seek alternative sources of gas. However, wholesale prices have recently dropped due to the decrease in global demand, unprecedented warm temperatures, and the nearly full storage of European gas facilities.1

  • The Consumer Price Index (CPI) measures the change in prices of a representative basket of goods and services over time.

By monitoring inflation trends through the CPI, we can better understand the impact of inflation on the purchasing power of money, which in turn affects investment returns and the overall economic environment.

The Eurozone

Inflation in the Eurozone dipped last month, from 8.5% in February to 6.9% in March. Numbers for April have not been released yet. This decrease can be attributed to the fall in energy costs.2

The overall impact of the prolonged high energy costs have spread throughout the broader economy, affecting areas such as services and wages. Most ECB policymakers believe interest rates must keep rising to combat this inflation–in smaller steps as compared to previous rate hikes.3

On 4 May 2023, the ECB will meet to decide whether to implement a further quarter or half percentage point (0.25% – 0.5%) interest rate hike.4


Inflation rate

April 2023

Currently unavailable

March 2023


February 2023


January 2023


Source: eurostat

Wage growth impacts ECB’s inflation goals

In Germany, public sector workers have recently been granted a 5.5% pay increase, which may create potential complications for the ECB’s fight against inflation. This agreement could set a precedent for other salary negotiations across the Eurozone, which would challenge the ECB’s prediction that wage growth will peak this year, and inflation will return to the 2% target by 2025.5

The ECB has estimated that average wage growth across the Eurozone will be at 5.3% in 2023, followed by 4.4% next year, and 3.6% in 2025.6

  • Recent trends show that wage growth has trailed inflation, exacerbated by rising energy prices. The ECB’s benchmark target for inflation is 2% by 2025.7 If inflation remains close to this target, the wage growth could lead to a positive impact on purchasing power, as people would have more money to spend without facing significantly higher prices.

Surging prices in the Eurozone

Food, tobacco, and alcohol had the highest annual rate in March at 15.5%, up 0.5% from February. In the upcoming months, food inflation is projected to be the primary driving force behind consumer price inflation in both Italy and France. Although global food commodity prices have declined, food inflation is likely to persist in the long term.8

The United States

US annual inflation slowed to 5% in April, the lowest rate since 2021, with the CPI indicating a gradual easing of price increases. Core inflation, excluding volatile energy and food prices, remained steady at 5.6% in March.9


Inflation rate

April 2023


March 2023


February 2023


January 2023


Source: U.S. Bureau of Labor Statistics

Despite the cooling inflation, the United States Federal Reserve (The Fed) is expected to continue raising interest rates to curb inflation further.10

In March, the Fed increased rates by a quarter of a percentage point (0.25%) to a range of 4.75% to 5%, marking the ninth consecutive rate hike. Jerome Powell, Chair of The Fed, emphasized the Central Bank’s commitment to bringing inflation down to a 2% target.11

The Fed’s next meeting on interest rate decisions is scheduled for 2 May 2023.

United Kingdom

Inflation in the UK remains above 10%, with a slight dip from 10.4% in February – but much higher than inflation in the US and the Eurozone. The high inflation rate can be attributed to a sharp increase in food prices, which rose by 19.2% through the year to March, reaching the highest rates in over 45 years.12

In addition, low unemployment and worker shortages have led to wage growth, which has sustained inflation even though pay rises have not kept pace with surging prices.13

  • Worker shortages lead to an increased demand for labor. To meet this demand, employers offer higher wages.


Inflation rate

April 2023

Currently unavailable

March 2023


February 2023


January 2023


Source: Bank of England

Inflation in the UK is likely to decline throughout the remainder of the year, as lower gas prices have a spillover effect on household energy bills.


As other global economies struggle with rising inflation, China faces the opposite problem. In March, inflation hit a seven-month low at 0.7%.17

  • Low inflation often indicates weak consumer demand, which can lead to stagnating economic growth. It can also be a precursor to deflation, where falling prices cause consumers and businesses to delay spending, leading to higher unemployment and a higher burden of debt.


Inflation rate

April 2023

Currently unavailable

March 2023


February 2023


January 2023


Source: Trading Economics

Despite the People’s Bank of China (PBOC) cutting interest rates and injecting cash into the financial system, Chinese households continue to save rather than spend. Companies also remain cautious about new investments, which raises concerns about a potential deflationary spiral.18

Consumers have not responded to the PBOC’s efforts to boost spending, and much of the new bank lending has been used by local governments to repay high levels of debt. Analysts suggest that the Chinese government should consider cash handouts to stimulate demand, a policy that has been adopted by other major economies but rarely by China.19

Despite these concerns, the PBOC has dismissed the prospect of deflation, arguing that there is no basis for long-term deflation or inflation.

The PBOC expects consumer demand to improve and price increases to return to average levels in the second half of the year as financially supportive policies take effect. In March, the PBOC reduced the reserve requirements ratio (RRR) for lenders. This was the first time this year that such a reduction had been made.20 21

  • The RRR is the percentage of deposits that banks are required to hold as reserves with the central bank. By reducing the RRR, the PBOC is allowing banks to hold a smaller portion of their deposits as reserves and freeing up more funds for lending and other activities. This move is aimed at stimulating economic growth by increasing the availability of credit and boosting investment and consumption.


Core consumer inflation slowed for a second consecutive month in March, yet remained above the Bank of Japan’s (BOJ) 2% target. The recent data signifies the widening price pressures in the world’s third-largest economy. 14

“The BOJ’s forecasts of trend inflation for half a year, one year and one-and-a-half years ahead must be quite strong and close to 2%. We also need to judge that the likelihood of the forecasts materialising is high,” – Kazuo Ueda, Bank of Japan Governor.15

Japan’s inflation is expected to reach its peak soon, and slow back down below the BOJ’s 2% target by March 2024.16


Inflation rate

April 2023

Currently unavailable

March 2023


February 2023


January 2023


Source: Trading Economics

Key takeaways for investors on Mintos

  1. Invest in inflation-resistant assets

During times of high inflation, investors should consider allocating a portion of their portfolios to assets that tend to perform well under such conditions, such as Notes on Mintos, commodities, real estate, and inflation-protected securities.22

  1. Currency diversification

Given the varying rates of inflation across the major global economies, it’s important to diversify currency exposure in your investment portfolio. This could help mitigate currency risk and protect the overall value of your investments. 

  1. Monitor central bank policies

Central banks play a crucial role in managing inflation and deflation risks. As an investor, staying informed about their monetary policies could help you anticipate changes in the market and adjust your investment strategy accordingly. 

  1. Consider investments in loans on Mintos

On the demand side, investor demand for Notes is affected by various factors, such as the prevailing interest rates in the market, the perceived level of risk associated with the Notes, the economic conditions of the countries where the borrowers reside, and the availability of other investment options.

Overall, investments in loans are typically less influenced by market drivers compared to publicly traded investments, resulting in a low correlation between the two. This means that investments in loans could serve as a buffer against market downturns.

In 2023, Mintos investors experienced growth with an average net return of 2.8%, while the average interest rate increased from 12% to 12.6%.

Mintos Activity: April 2023

In April, the total investments on Mintos saw a spike of €102.8 million worth of Notes funded, with interest earned by investors amounting to €4.9 million. This was largely driven by “a decrease in overdue payments and the corresponding funds being largely reinvested by the investors,” said Peteris Mikelsons, Head of Partnerships.

The average interest rate for April was 12.6%, resulting in an annualized average net return of 8.8% annualized (2.8% YTD). The all-time interest earned by investors on Mintos now stands at €230 million, with a total of  €575.6 million assets under administration. 

According to Mikelsons, “Notes available for investment in EUR went down to €72 million (€90 million at the end of March),” due to an increase in investments and the start of a somewhat quieter season for non-bank lending.

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1 Averting a full-blown gas crisis in Europe, Geopolitical Intelligence Services (Accessed May 2023)

2 Inflation in the euro area, eurostat (Accessed May 2023)

3 Monetary policy after the energy shock, European Central Bank (Accessed May 2023)

4 Schedules for the meetings of the Governing Council and General Council of the ECB and related press conferences, European Central Bank (Accessed May 2023)

5 Analysis: Germany’s ‘very generous’ pay deal may complicate ECB’s inflation fight, Reuters (Accessed May 2023)

6 ECB staff macroeconomic projections for the euro area, European Central Bank (Accessed May 2023)

7 On Inflation’s Front Line, International Monetary Fund (Accessed May 2023)

8  Inflation in the euro area, eurostat (Accessed May 2023)

9 Consumer Price Index, U.S. Bureau of Labor Statistics (Accessed May 2023)

10 US Fed likely to make final interest rate hike in May, and other economy stories you need to read this week, World Economic Forum (Accessed May 2023)

11 Federal Reserve issues FOMC statement, Board of Governors of the Federal Reserve System (Accessed May 2023)

12 Consumer price inflation, UK: March 2023, Office for National Statistics (Accessed May 2023)

13 Labour market overview, UK: April 2023, Office for National Statistics (Accessed May 2023)

14 BOJ chief wants ‘quite strong’ inflation before tweaking yield control policy, Reuters (Accessed May 2023)

15 ibid.

16 ibid.

17 China Inflation Rate, Trading Economics (Accessed May 2023)

18 China makes surprise rate cut to boost banking liquidity and the economy, CNN (Accessed May 2023)

19 China has an inflation problem. It’s way too low, CNN (Accessed May 2023)

20 China cuts banks’ reserve ratio for first time in 2023 to aid recovery, Reuters (Accessed May 2023)

21 China’s official dismisses long-term deflation scenario, Reuters (Accessed May 2023)

22 Do P2P Loans provide Diversification Benefits in Multi-Asset Portfolios? Aue, T. G. (Accessed May 2023)


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