There are three reasons to believe that may be the case
Save time by listening to our audio articles as you multitaskTwo years on, the Fed faces very different circumstances: rock-bottom unemployment, strong wage growth and rates of inflation far above the central bank’s target. On August 26th, at an annual jamboree for central bankers in Jackson Hole, Wyoming, Mr Powell sang a different tune.
Worriers see a few reasons why inflation may stay high. Government spending and borrowing patterns seem to have changed, for one. Across rich and emerging economies, public-debt loads have soared over the past two decades. As debt burdens rise, markets may begin to fear that central banks will eventually have to help finance governments’ obligations, say by creating new money to buy bonds. That could erode central-bank credibility and raise the public’s expectations of future inflation.
Workers are scarcer, too. Population growth in the rich world has slowed dramatically owing to demographic change and lower immigration. In some economies, like America, the pandemic was associated with a further drop in labour-force participation. From the 1990s to the 2010s, global labour supply expanded rapidly as populous economies like China and India became better integrated into the world economy.
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