The Banking Executive Magazine - August 2021

The Healthy Inflation The terrifying stories from the 1929 Great depression in the United States economy and those of the 1970s may offer valuable lessons, but they are no longer suitable for today's world. In a world experiencing fundamental economic, technological, and cli- matic change, we must diagnose that not all price surges are the same, and that some are necessary. In response to recent worries about rising inflation, US policymakers dis- agree that there is any threat and in- sist that expectations are “well fixed”. Any recent price increase, they argue, will prove temporary, arising from one-off shortages that will be resolved when life returns to normal after the pandemic. How- ever, market participants and in- vestors are increasingly obsessed with the issue. Such a scenario suggests a need to the BANKING EXECUTIVE 34 ISSUE 152 AUGUST 2021 The Healthy Inflation