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Secular Inflation

After enjoying a long period of deflationary conditions, the global economy is being pushed by a wide range of forces toward a new and more difficult equilibrium. Surges in demand that used to be accommodated by expansions in supply will now lead more frequently to higher prices.

MILAN – The post-pandemic economy’s high inflationary pressures are being powered in part by secular trends and forces, many of which are operating on the supply side. While there are also transitory factors – such as supply-chain disruptions and bottlenecks, and China’s zero-COVID policy – these presumably will abate at some point. But the secular trends are likely to lead to a new equilibrium in many economies and global financial markets.