The pandemic gave rise to numerous sectoral supply constraints and demand shifts that – together with adjustment asymmetries – became the primary drivers of price growth. Any benefits from the extra interest-rate-driven reduction in inflation will be minimal compared to what would have happened anyway. Inflation already appears to be easing. It may be moderating more slowly than optimists hoped a year ago – before Russia’s war in Ukraine – but it is moderating nonetheless, and for the same reasons that optimists had outlined. Higher interest rates make it even more difficult to mobilize investments that could alleviate supply shortages.
- Date Posted:
- December 8, 2022