Is Inflation Returning?
Inflation is now low in every industrial country, while high unemployment and slow GDP growth removes the usual sources of upward pressure on prices. Nevertheless, investors are increasingly worried about future inflation, owing to the large expansion of commercial bank reserves engineered by the Federal Reserve and the ECB.
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CAMBRIDGE – Inflation is now low in every industrial country, and the combination of high unemployment and slow GDP growth removes the usual sources of upward pressure on prices. Nevertheless, financial investors are increasingly worried that inflation will eventually begin to rise, owing to the large expansion of commercial bank reserves engineered by the United States Federal Reserve and the European Central Bank (ECB). Some investors, at least, remember that rising inflation typically follows monetary expansion, and they fear that this time will be no different.