The surge in transatlantic inflation has exacerbated economists’ concerns about economic overheating


The pace of rising prices on both sides of the Atlantic has rekindled economists’ concerns about the risk of overheating. Pile driving pressure Policymakers consider exiting their unprecedented stimulus policies during the pandemic more quickly.

Data released earlier this week showed that U.S. consumer prices The year-on-year growth in June was 5.4%, the fastest growth rate since 2008, and the growth rate was higher than economists expected.

Then the data released on Wednesday show In the same period, the UK inflation rate reached 2.5%, the highest level since 2018.

Most economists and policymakers still view this trend as a temporary phenomenon related to the removal of pandemic-related restrictions, rather than a return to the 1970s-style inflation spiral. But many people admit that the possibility that inflation will continue to rise may be increasing.

Price drivers

Both the United States and the United Kingdom are experiencing price increases, partly because of their economic opening as a measure to control transmission coronavirus Very relaxing.

For example, in the United States, the prices of travel-related costs such as air tickets, hotel fees, and car rental have risen sharply.

Both economies are also experiencing price increases in the sectors that have suffered losses Supply chain bottlenecksIn the United States, the index of old cars and trucks has increased by 45.2% compared to June last year.

Energy costs have risen sharply Crude oil prices.

Economists pointed out that there has been a small but significant increase in rental prices in the United States-prices in this area of ??the economy usually adjust more slowly, but the changes may last longer.

Much of the inflation dynamics in the UK echoes what is happening in the US; British inflation It has been following the rise of US interest rates, but it has been delayed for several months.

Economists said that this situation may continue in the coming months. Capital Economics chief British economist Paul Dale said: “We believe that as the UK inflation rate climbs to around 4% by the end of the year, we believe the gap between the two will narrow.”

Britain’s deputy national statistician Jonathan Athow said price increases were “general”, but specifically mentioned “increased prices for food and used cars, and reportedly increased demand”.

Why not the Eurozone?

Inflation in the Eurozone has also picked up after negative months in 2020.But the rate of increase is milder than that of the United States and the United Kingdom; Eurozone inflation in June Slightly down To 1.9%.

This may simply be because the 19-nation currency group lags far behind the United States and the United Kingdom in terms of vaccination plans and reopening the economy.

Economists expect Eurozone inflation As the economic recovery is gaining momentum, it will increase again in the second half of this year. For example, the Bundesbank expects its inflation rate to reach 4% later this year, which will be the highest level in more than a decade.

There is also a technical factor that is expected to boost the overall calculation: German VAT was temporarily reduced in the second half of last year, but it has now been reversed, and this change will affect the overall figure in July.

Spillover Effect?

In the coming weeks and months, a big question for economists in these three places is whether these price increases are adequately controlled to avoid spreading to the wider economy in an unhealthy way.

Some people believe that so far, the risk is very low.

Although the overall US price growth rate in June was 0.9%, Steven Englander, head of North American macro strategy at Standard Chartered Bank, calculated the potential growth rate-excluding industries such as new and used cars and automobiles. Rents, hotels and air tickets, as well as more volatile food and energy costs-will only be 0.22%.

Megan Green, a senior researcher at Harvard University’s Kennedy School of Government, is also cautious. “In the absence of a wage spiral, an inflation spiral is really difficult, and there are still very few signs that we may have a wage spiral,” she said.

The dilemma of policymakers

Pattern left Central banker And other economic policymakers on both sides of the Atlantic are struggling to deal with rising prices for the first time in decades. This is a sharp shift in their concerns about continued low inflation after the 2008-09 financial crisis.

If they underestimate the persistence of price growth and dismiss the evidence so far as short-lived evidence, they may have to raise interest rates more suddenly in the future to catch up.

in case inflation Becoming entrenched, policymakers may even have to take fiscal action to cool their economies.

On the other hand, if they withdraw their economic support measures during the pandemic too quickly, they may jeopardize the delicate phase of the recovery.

Given the increasing spread of the virus, this is a special danger Coronavirus variants In many parts of the world.

So far, the Fed and the Bank of England have insisted that inflation will be short-lived, although they both said that if the data proves reasonable, policies may be tightened earlier than previously thought.

The Federal Bank of Germany and the European Central Bank also predict that price growth in the euro zone will slow next year.The European Central Bank predicts inflation will be lower than its Recently revised Reach the 2% target in 2022 and reach 1.4% in 2023.

Christine Lagarde, President of the European Central Bank Tell the financial times On Sunday, the bank’s new strategy “is designed to send a signal that we will not tighten prematurely” by tolerating higher-than-target inflation for longer periods of time. But the governor of the Bundesbank Jens Weidmann (Jens Weidmann) call Bond purchases have slowed down.

However, central bank officials have repeatedly failed to foresee the economic trajectory, which has made some analysts more nervous.

Kallum Pickering, economist at Berenberg Bank, said: “Given the long-term outlook for inflation in the UK and the US that continues to be modest above the central bank’s target, the stronger-than-expected recent impulse for inflation may turn into a sustained trend.”

“For the time being, this risk is still small. However, the historical warning is clear: all periods of persistently high inflation are temporary at first.”

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