There is a growing debate about whether the inflation that will arise over the next few months will be temporary, reflecting the sharp bounce-back from the COVID-19 recession, or persistent, reflecting both demand-pull and cost-push factors.
Several arguments point to a persistent secular increase in inflation, which has remained below most central banks’ annual 2% target for over a decade. The first holds that the United States has enacted excessive fiscal stimulus for an economy that already appears to be recovering faster than expected. The additional $1.9 trillion of spending approved in March came on top of a $3 trillion package last spring and a $900 billion stimulus in December, and a $2 trillion infrastructure bill will soon follow. The US response to the crisis is thus an order of magnitude larger than its response to the 2008 global financial crisis.The counter-argument is that
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Is Stagflation Coming? by Nouriel Roubini - Project Syndicate
