After the 2008 crash, hawks worried about debt. Amid this one, they’re fretting about price rises. They were wrong then, and they’re likely to be wrong now
Inflation is back. That old foe of central bankers, mugger of pensioners and fashion staple of the 1970s is once again in the news. Its return is being talked about at Threadneedle Street and at the US Federal Reserve. It is creeping into newspaper headlines and on to market-watchers’ worry lists. But some perspective is essential: the price rises of today are nothing like those we saw half a century ago, because the world we live in is nothing like that one. Many of the fears expressed over any sign of rising prices are misplaced.
Economists are perhaps not the first people you might want to hear from about fashion, but one guaranteed revival for this spring/summer is: price rises. They will be in the news a great deal over the coming months. Last week’s news of a doubling of the inflation rate is just the beginning. The primary reason for that is mechanical. Last year saw many parts of the economy put in deep freeze to prevent the spread of Covid; with the reopening of pubs, restaurants and clothes shops, and the return of high street spending, prices will tick up. In this sense, inflation is to be welcomed as a sign of economic growth after a record slump. Another factor will not have passed motorists by: fuel prices, both at the petrol pump and to heat homes, are on an upward march.
