CHRONIC. Switch to a higher inflation target or accept a recession and, perhaps, a financial crisis: Fed and ECB are at an impasse.
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With the sharp increase in demand for goods following the Covid crisis, and with supply problems energy, metals, agricultural products resulting from the war in Ukraine, inflation will reach a very high level. The peak of inflation could exceed, in 2022, 9% in the United States and the United Kingdom, 8% in the euro zone.
Part of this inflation will disappear when commodity prices first ones will stabilize, even at a high level; but part of it will persist, because wages, even badly indexed to prices, are accelerating; because companies that have pricing power (the ability to raise their prices) spend significant price increases; we even see an increase in corporate profit margins in the United States. From