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Why inflation persists

By Lars P. Feld

31 Mar 2021 · 10 min read

informed Summary

Takeaways:

BERLIN – Inflation is back, and it is demonstrating its usual tenacity. In the United States, the inflation rate rose from 1.2% in 2020 to 4.7% in 2021 and 8.1% in 2022. The forecast for 2023 is 3.5%, but recent figures have shown a disappointingly modest decline. As of February 2023, the US annual inflation rate was 6%, but core inflation (excluding volatile energy and food prices) had increased by 0.5% and remained high, at 5.5%.

Inflation in the eurozone is demonstrating similar persistence. The annual rate increased from 0.3% in 2020 to 2.6% in 2021 and 8.4% in 2022. And while inflation is expected to decline to 5.6% in 2023, recent figures, like in the US, have been disappointing. In February, annual inflation decreased only slightly, to 8.5% (from 8.6% in January), while core inflation increased to 5.6% (from 5.3% in January).

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