“It is naïve to think everyone is going to get their jobs back when this pandemic virus goes away,” said Chris Rupkey, chief financial economist at MUFG Union Bank NA. “Massive job losses mean price declines for many goods are on the way.”
For Goodhart’s thesis of “double-digit” inflation to unfold, Perkins reckons authorities would need to succeed relatively quickly in limiting deaths and shoring up growth, which isn’t a given. He isn’t worried.
Blanchard, in an April 24 article for the Peterson Institute for International Economics, also sees a far greater probability of low inflation. But a combination of swelling public debt, a jump in real interest rates, and deliberately loose monetary policy to aid government financing, could produce a different outcome.
“It would be a dream scenario for politicians that at some point inflation goes up,” Praet said. “It’s not impossible. But I think the structural consequences of this shock go well beyond the simple narrative of a normalization, once we have a vaccine.”
--With assistance from Cecile Gutscher.
This article was provided by Bloomberg News.