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The surge in household savings that many markets have experienced during the pandemic provides a bulwark against recent inflationary pressures, says Fitch Ratings.

In a new report, the rating agency said that elevated savings rates in the U.S. and Europe — driven by factors such as strong fiscal supports that boosted incomes plus reduced spending — have put household balance sheets in relatively strong positions.

Now, these added savings “are likely to provide an important buffer to the current inflationary shock,” Fitch said.

“This should help households to weather a decline in real income — caused by higher inflation — without the need to cut back so heavily on consumption or residential investment,” the rating agency noted.

In Europe specifically, household consumption remains below pre-pandemic levels, whereas it has fully recovered in the U.S., the report said.

“These different trends mean that household saving ratios have declined more noticeably in the U.S., though even there they remain very high by historical standards,” Fitch noted.