With inflation climbing to multi-decade highs and price pressures broadening out, the International Monetary Fund (IMF) has warned that there’s now a “substantial risk” that high inflation becomes a more permanent fixture and that expectations around future rates of inflation could become unmoored and drive a wage-price spiral.
A team of IMF economists said in a recent blog post that central banks in the world’s major economies have, for the most part, been caught by surprise by the intensity and persistence of the current inflationary wave.
“Inflation seemed to be driven by an unusual mix of supply shocks associated with the pandemic and later Russia’s invasion of Ukraine, and it was expected to decline rapidly once these pressures eased,” the economists wrote….