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What may happen when central banks wake up to more persistent inflation?

Summary:
We are seeing inflation rise across most economies in the world. However, most central banks have treated the inflation as transitory. Charles Goodhart and Manoj Pradhan look at this question of What may happen when central banks wake up to more persistent inflation: The current mini-surge in inflation is forecast to return to central bank targets towards the end of 2022, or shortly thereafter. However, there is also a risk of inflation remaining persistently high for longer. This column discusses the implications of such a contingency for central banks and monetary policy. The authors warn that sudden policy reversals could lead to severe downturns in financial markets and significantly damage public sector balance sheets. Policy Suggestions: So, central banks need to consider

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We are seeing inflation rise across most economies in the world. However, most central banks have treated the inflation as transitory.

Charles Goodhart and Manoj Pradhan look at this question of What may happen when central banks wake up to more persistent inflation:

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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