The 1970s featured a whole decade of inflation. We feel that it may not be as persistent this time around. Instead of intuitively aiming at a peak, we would look further into the future. We believe that inflation will eventually subside, however at levels higher than the pre-pandemic 1.5 per cent to 2 per cent. The confluence of China’s transition to the tertiary economy and the global transition to green energy may well bring long-term inflation higher, at 2 per cent to 3 per cent. This is the real number economists, policymakers and asset allocators should be considering for their long-term approach.
George Lagarias is chief economist at Mazars
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