Global Inflation: How Big a Threat?
8 Pages Posted: 1 Oct 2008
Date Written: 2008
In this speech, Andrew Sentance, a member of the Monetary Policy Committee, discusses the origins of the recent change in the global inflation climate, whether the change in trend is likely to be sustained and the implications for monetary policy. He highlights the stronger inflationary impetus from goods traded on global markets in recent years, reflecting strong growth in developing and emerging markets. Though the major developed economies are better placed to deal with the current round of price shocks than during the 1970s, emerging market and developing economies may be more vulnerable. But avoiding the mistakes of the 1970s, when high inflation became deeply ingrained and embedded in behaviour and expectations, is likely to require a squeeze on spending and incomes - with consequences for economic growth in the short term.
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