Assessing risks and investment implications
The extraordinary events of 2020 so far has led to a significant downward revision in short-term inflation estimates across the globe. However, following unprecedented monetary and fiscal policy action, concerns have resurfaced regarding the possibility of a resulting increase in medium- to long-term inflation. These concerns are reminiscent of those raised amid monetary interventions during the global financial crisis (GFC). This paper compares inflation during the post-GFC experience with that of the COVID-19 environment, and assesses the risks of policymakers doing too much to support economic activity (which could result in higher inflation in the medium to long term).
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