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Global reflation ?

Author

Listed:
  • Flora Budianto
  • Giovanni Lombardo
  • Benoit Mojon
  • Daniel Rees

Abstract

Inflation has risen in many countries. In conjunction with a rebound in GDP growth and evidence of significant bottlenecks in some sectors, this has prompted concerns that the low inflation era of recent decades could be nearing its end. A closer look at the data reveals that the pickup in inflation can be ascribed largely to base effects, increases in the prices of a small number of pandemic-affected items and higher energy prices. A common thread through these causes is that their effect on inflation is likely to be temporary. A more persistent increase in inflation would likely require a material pickup in labour costs and an unmooring of inflation expectations. However, wage growth remains contained and the medium-term inflation expectations of professional forecasters and financial markets show little sign of de-anchoring. These developments are consistent with medium-term inflation moving towards central bank targets.

Suggested Citation

  • Flora Budianto & Giovanni Lombardo & Benoit Mojon & Daniel Rees, 2021. "Global reflation ?," BIS Bulletins 43, Bank for International Settlements.
  • Handle: RePEc:bis:bisblt:43
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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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