Matolcsy: Higher but not runaway inflation is coming

English2021. feb. 26.GOVERNOR MATOLCSY100WORDS

We are just in the midst of a dilemma about the future of inflation. Professor Jeremy Siegel is probably right in saying that inflation will run well above the Fed’s 2% target and will do so for several years; however, no hyperinflation can be seen on the horizon. /FT, 20 January 2021/

Nevertheless, a couple of other factors might play their roles in the future of inflation.

First of all, we do not measure inflation properly because we fail to include all the effects of the ongoing technological revolution, especially the impact of digital transition. Nowadays, we might have much lower inflation than we see in our statistics. So, we might have some empty places to fill in.

The US will gradually replace China with other emerging Asian economies in its trade. That probably will have the same impact on prices in the US as during the rising periods of the US-China trade.

Also, the digital transition in the American economy will definitely accelerate partly in response to the huge and efficient digital transformation of the Chinese economy.

Besides, we have learnt a lot from the damages caused by the hyperinflation of the 1920s and the 1970s. At present, no one is really interested in a runaway inflation globally and in the US.

Governor Matolcsy, MNB, the Central Bank of Hungary

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