Europe Shouldn’t Worry About Inflation

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Publication Date July 2021
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As Europe is exiting the pandemic, it is crucial that policy-makers do not choke off the economic recovery out of a misplaced fear of inflation. In fact, a period of above-target inflation would be helpful to make sure that the economy really has fully recovered and that all capital and workers are employed. But pushing the European economy sustainably out of its low inflation mode of the last decade towards rates above 2 per cent is not easy. Of the five ingredients that are needed to achieve sustained inflation, Europe currently has none.

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