Is stagflation-lite the start of something more serious?

With supply shortages set to persist for the next 6 to 12 months, the current period of “stagflation-lite” will persist a while longer. But it is likely to remain a pale imitation of the 1970s stagflation episode. Meanwhile, we do not share the pessimism of those who think that the current supply shortages are just one of a series of stagflationary shocks likely to hit the economy in the coming years.
Vicky Redwood Senior Economic Adviser
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What if energy prices keep rising?

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Economies after COVID: one year on

It is a year since we published our “Economies after COVID” series, so now seems like a good time to pause and take stock of how our predictions about the legacy of the pandemic are shaping up. There is a still a long way to go until the pandemic’s full effects can be judged, not least because the pandemic is…

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Is the rise in house prices becoming a concern?

It is an under-statement to say that house prices have weathered the pandemic well; housing markets are positively booming. Yet the drivers of this rise in prices are rather different to those of the pre-2007 housing boom, meaning that we do not seem to be heading for a repeat of the housing-driven financial crisis of 2007/08. Nonetheless, there are pockets of concern, and we would get more worried if it looked like interest rates were about to rise sharply.

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Will a post-pandemic surge in demand fuel inflation?

Demand was always likely to rebound strongly as economies re-opened and confidence returned. Beyond this, though, there are reasons to think that we could now be in for a period of sustained strong aggregate demand in developed economies. Initially, this will be soaked up by spare capacity. But demand might stay strong even once economies return to full employment, potentially fueling inflation. This risk looks highest in countries which have seen the biggest policy stimulus and the smallest amount of pandemic-related economic damage, with the US most obviously fitting the bill.

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