Seven reasons why high inflation could be here to stay
Central banks and many other forecasters may be underestimating the risk of persistently high inflation. While our view is that inflation is likely to recede next year, the outlook is highly uncertain, with evidence underscoring the risk of a more gradual slowing. Inflation expectations appear weakly anchored and public support for central banks patchy. Sluggish past disinflations add to the reasons why inflation could stay elevated.
What you will learn:
- The longer inflation stays high, the more embedded it is likely to become. Surveys point to growing public awareness of price rises, accompanied by a perception that inflation is at record levels.
- Polls like our own Global Risk Survey of businesses show near-term inflationary pressures feeding through to the level of inflation expected further ahead. Medium-term inflation expectations have tended to rise significantly since the pandemic began, albeit to varying degrees across countries.
- The idea that the low inflation of recent decades reflects central bank credibility appears misplaced. Surveys show many people to be either unaware of the objectives of central banks or doubtful over their ability to meet inflation targets.
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