Which way GDP?:Europe is about to find out whether or not it will suffer a long-lasting economic fallout from the pandemic
Last year’s inflation story was a comforting one. The common view among economists was that we were in a transitory period.
Nobody knew how long prices would keep steadily creeping up, but we were assured that it wasn’t going to be permanent. The message was simple: There’s no need to panic, so take a step back, hawks.
Nobody is panicking right now either. But at the end of last year, the chair of the Federal Reserve, Jerome Powell, effectively argued that talk of transitory inflation should stop. Was that because inflation was rapidly coming down then? Well, no. The price of goods and services in the United States hit 7 percent in December, and the Fed is now expected to keep raising rates all year in a bid to fend off further increases.
European Central Bank President Christine Lagarde has tried to calm markets by stating that inflation in the euro zone is unlikely to follow the surges seen in the United States, and in December there was a clear indicati