The sharp increases in gas and electricity prices in Europe mean that households there – particularly in Germany and Italy – will see a steep rise in their costs of energy consumption. Accordingly, governments have announced support packages worth 1.5% to 7% of GDP. But more stimulus means that monetary policy will need to be tightened even more aggressively. On the other hand, households in the US and Canada will be no worse off than pre-pandemic, giving central banks scope to loosen policy next year.
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