issing14_OLIVIER DOULIERYAFP via Getty Images_fed reserve inflation OLIVIER DOULIERYAFP via Getty Images

The High Stakes of Rising Inflation

Although some of the obvious factors behind recent price surges will almost certainly subside in due time, others will linger, adding to the already-high inflationary pressures that have been building across the global economy. Worst of all, major central banks continue to put themselves out on a limb.

FRANKFURT – Many countries are reporting their highest rates of inflation in decades: 6.2% in the United States, 4.2% in the United Kingdom, 5.2% in Germany, and above 4% in the eurozone. Some insist that it is a temporary phenomenon; others fear that we must brace ourselves for an extended period of significant price increases driven by expansionary monetary policies and rising public debts.

Still, both camps agree that at least some of the factors behind the recent inflationary surge will soon subside or disappear. In 2020, prices rose only slightly, and even declined in some cases, setting a low baseline for the year-on-year increase in 2021. Surging prices for heating oil, gas, petrol, and diesel are also generally considered to be temporary. A significant decline in headline inflation can thus be expected in most countries in 2022.

In the longer term, however, we must adapt to higher fossil-fuel prices in order to fight climate change. Similarly, though the across-the-board price spikes in building materials, computer chips, and raw materials are not expected to continue indefinitely, nor are we likely to find lasting relief.

https://prosyn.org/HX1tHoM