October 17, 2021

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The economy is recovering faster than expected.  The big question is: Will prices continue to rise?

The economy is recovering faster than expected. The big question is: Will prices continue to rise?

The big question on economists’ minds is: is this temporary or will prices continue to rise? Salomons expects that bottlenecks in logistics chains will be temporary, and so will the resulting price hike. “We underestimated how strong the recovery is, how quickly demand will bounce back. It makes sense that you’d have higher inflation numbers.”

The European Central Bank is targeting an inflation rate of 2%. This is the ideal amount of price increase on average per year. It makes people want to keep spending money, because if you wait you can buy a few – that’s the idea.

temporary

in a August The inflation rate in the European Union was 3%. The ECB assumes this will be temporary, so actions, such as raising interest rates, are not yet expected. Higher interest rates increase the cost of borrowing money, allowing central banks to cool down the economy.

The European Central Bank is actually contributing to this inflation, thanks to an unprecedented Pandemic Purchase Program that allows governments, businesses and households to continue to borrow money cheaply. Make a corporate support package possible.

The Central Planning Office also concluded in last week’s analysis that the price increase may be temporary, in part because the underlying causes appear to be diminishing.

There are also concerns that inflation is structural, among other things with former US Treasury Secretary Larry Summers. It indicates, among other things, that housing prices are rising around the world, but is not included in the inflation figures.

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