Stagflation: a demand or supply side story?

The semi-annual meetings of the IMF and World Bank start today where finance ministers and central bankers will meet in slimmed-down but in-person gatherings in Washington.  This meeting is likely to be overshadowed by the scandal involving the IMF chief Kristalina Georgieva, who may well have been forced to resign as I write after aContinue reading “Stagflation: a demand or supply side story?”

The Fed, interest rates and stagflation

“The economy has made progress toward employment and inflation goals and if progress continues broadly as expected, a moderation in the pace of asset purchases may soon be warranted”, the US Federal Reserve officials said in their September monetary policy statement. The Fed also signalled interest-rate increases may follow more quickly than expected, with 9Continue reading “The Fed, interest rates and stagflation”

Deflation, inflation or stagflation?

During the year of the COVID, global consumer and producer prices inflation dropped. In some manufacturing-based economies, there was even a fall in price levels (deflation) eg the Euro area, Japan and China). US inflation rate (annual %) “Effective demand” as Keynesians like to call it, plummeted, with business investment and household consumption dropping sharply. Continue reading “Deflation, inflation or stagflation?”

Europe: caught in a trap

The major economies are moving closer to recession, if they are not already there; and yet inflation rates continue to rise (for now).  The latest surveys of business activity, called Purchasing Managers Indexes (PMIs), show that both the Euro area and the US are now in contraction territory (i.e. any level below 50).  The compositeContinue reading “Europe: caught in a trap”

A tightening world

It’s been a big week for the major central banks. First, the European Central Bank (ECB) called an emergency meeting because government bond yields were rising sharply in the more indebted Eurozone economies like Italy and Spain.  That threatens to deliver a new sovereign debt crisis as happened after the Great Recession from 2010-2014, leadingContinue reading “A tightening world”

The war on inflation

The Russian invasion of Ukraine grinds agonisingly on with more dying and displaced and with further destruction of Ukrainian cities, farms and homes.  Back in the major economies, there is another war brewing: the war on inflation.  Inflation of consumer prices are now at 30-40 year highs with more to come.  The COVID pandemic slumpContinue reading “The war on inflation”

Ukraine-Russia: like an earthquake

“The war in Ukraine is like a powerful earthquake that will have ripple effects throughout the global economy, especially in poor countries”.  That’s how IMF chief Kristalina Georgieva described the impact of the war on the world economy.  Nobody can be sure of the magnitude of this quake but even on the most optimistic view,Continue reading “Ukraine-Russia: like an earthquake”