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Do Not Bet On A Soft Landing With Central Banks In Such A Scramble

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In 2021, the big debate about the outlook for the global economy focused on whether rising inflation in the US and other advanced economies was transitory or persistent. Key central banks and most Wall Street researchers were on ‘Team Transitory’. They attributed the problem to base effects and temporary supply bottlenecks, implying that the high inflation rate would rapidly fall back to the 2% target range of central banks.

Meanwhile, ‘Team Persistent’, led by Lawrence H. Summers of Harvard University, Mohamed A. El-Erian of Queens’ College at the University of Cambridge and other economists, argued that inflation would remain high because the economy was overheating from excessive aggregate demand. That demand was driven by three forces: persistently loose monetary policies, excessively stimulative fiscal policies and a rapid accumulation of household savings during the pandemic, which…

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