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Four key forces should support low inflation for years to come: IFI Monthly Outlook (July 2021)


August 18, 2021
Subject

Inflation in the U.S. and other countries has been high lately, raising the question of whether the low inflation era we have experienced since the 1990s is over. Central bankers and many economists argue that the current high level of inflation is transitory, and mainly due to the pandemic. As economies closed parts of their services sectors and supported incomes through fiscal policy, demand for goods became very strong. Supply was not able to catch up, blocked by COVID-related disruptions to production. But inflation has been surprising to the upside, challenging the belief in the transitory story. Where do we go from here?

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