Almost one year ago, AER alerted that there was a much higher risk of inflation than the market was discounting because of record fiscal and monetary stimulus (Inflation, Disinflation, Deflation: What Awaits after Coronavirus? Lessons from World War II). Since then, inflation expectations have risen sharply and the latest inflation readings in the US and Europe have sparked major concerns.
It is now essential to understand whether the acceleration of inflation and that of commodities and production costs in general, is transitory or not, since it will determine the expected evolution of interest rates, a key variable for economic decision-making.
Will central banks announce the end of bond purchases and begin to raise rates earlier than expected?
What happened in the past in similar circumstances?
Are inflationary acceleration and the acceleration of raw materials and production costs generally transitory?
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