- As the world starts to recover from the pandemic, a range of factors are converging to create a new inflationary era. Crucially, the policy regime is changing, driven by the need to respond to emerging social and environmental challenges and help manage record peacetime debt levels.
- The most obvious example is US core inflation, rising at its fastest pace since 1992 - close to when the inflation-targeting era began. Much of the upward pressure on prices reflects demand distortions and supply dislocations associated with COVID-19, and will probably fade with time.
- Markets are currently focusing on supply chains and pent-up household savings. These factors will help shape the near-term outlook and the extent to which upward pressure on prices is transitory. But they won’t tell us much about the longer-term outlook for inflation.
For further details see:
Inflation - Joining The Dots; Shifting Priorities Open The Door To Higher Inflation