The great inflation conundrum that policymakers must resolve4 min read 28 Nov 2021, 09:59 PM IST
It will take a fine balance to ensure that price pressures ease but the covid recovery does not suffer
Until a few months ago, inflation talk was little more than a murmur: dry data from the statistical office, reports tucked away in the newspaper, and an occasional commentary. Now the discussion is urgent, as news of rising price levels comes in from economies around the world, including Argentina, Brazil, Turkey, India, and, most importantly, the US. The US surge is causing the greatest concern because its spillover effects are far-reaching. The trouble is that—in a debate bookended by Paul Krugman and Olivier Blanchard—no one fully understands what is happening. Krugman thinks the current inflationary pressure is a short-term episode triggered by supply-chain disruptions, while Blanchard sees it as the result of the large spending under US President Joe Biden’s American Rescue Plan, and as a prelude to a longer battle.