Our new CIO Special looks at the important issue of inflation, brought into focus again by the economic impact of the coronavirus pandemic.
As we argue, the pandemic adds to existing challenges for policymakers trying to keep inflation at desired levels, with many monetary policy transmission channels not working properly.
In the short and medium term, we expect inflation to remain under downwards pressure from depressed demand, although sustained outright deflation is not expected.
In the longer term, we do not foresee sharp increases in overall rates of inflation. But prices could rise in some economic sectors due to monetary policy support, a recovery in demand, higher taxes and the impact of de-globalization.