Inflation then (1979-85) and now (2020-23): Why it is easier to fight inflation today

Paul De Grauwe, Yuemei Ji

The current period of inflation has been dominated by a positive demand shock and favourable initial conditions, such as low inflation expectations. This column argues that these two factors make the job of central banks today much easier than during the 1979-85 period. Provided no new disruptive shocks occur, the policies of disinflation since 2021 should lead to a swifter and much less costly path towards price stability compared to the 1970s–1980s. Monetary authorities both in the euro area and in the US should not raise interest rates too high and for too long, producing an unnecessary recession.

Πηγή: Voxeu

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