One potential risk facing advanced economies is "deflationary pressure".
In the near-zero rate environment, central banks already had a tough time meeting their stated inflation targets.
The figure shows cumulative deviation from respective targets.
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In the near-zero rate environment, central banks already had a tough time meeting their stated inflation targets.
The figure shows cumulative deviation from respective targets.
/1
Over the last five years, average inflation has been below target for all major CBs.
The strongest evidence comes from Japan, that has been in this predicament the longest.
The Covid crisis is likely to make this even more difficult.
Why does it matter?
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The strongest evidence comes from Japan, that has been in this predicament the longest.
The Covid crisis is likely to make this even more difficult.
Why does it matter?
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The level of debt has never been higher in the world - and that is a major issue.
One way to reduce the real burden of debt gradually over time is moderate inflation.
We need moderate targeted-inflation in advanced economies. And that might be a challenge in the near term.
/end
One way to reduce the real burden of debt gradually over time is moderate inflation.
We need moderate targeted-inflation in advanced economies. And that might be a challenge in the near term.
/end
