Wednesday, October 27, 2021

Fears of stagflation require decisive action to suppress panic

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TIn order to steal Ernest Hemingway, there are two ways for an economy to get into stagflation – gradually and then suddenly. The likelihood that this terrible play on words – a combination of stagnant growth and inflation – will become a reality has risen sharply in recent weeks.

The prices of raw materials, fuel and supplies for factories and many other goods rose sharply due to supply chain bottlenecks and labor shortages.

The Bank of England warned in August that inflation would rise to 4 percent by the end of this year, but last week its Governor Andrew Bailey added the warning, saying the development since then means inflation is likely to continue to rise above levels .

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