Tribune. Against all expectations, the Covid health crisis led, after the deployment of massive stimulus plans, to spectacular growth in the space of a few weeks. In the United States or in France, growth could reach more than 6% in 2021. This strong recovery explains in particular the multiple shortages and the resumption of inflation, which had, for twenty years, disappeared from the developed countries.
Inflation is nearly 5% in the United States and nearly 3% in Europe, including 4% in Germany. For the time being, the American Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England have refused to raise their rates, considering that this surge in inflation was temporary and linked to the very specific context of the post-Covid recovery which is itself cyclical.
Consumption is largely driven by the additional savings generated during the health crisis as well as by stimulus plans. However, these two mechanisms will gradually disappear during the year 2022. The price increases are concentrated in certain specific sectors such as energy, industrial goods and food. In these areas, companies should adjust supply to demand in the coming months, putting an end to the price increases currently observed.
Core inflation around the world
Of course, these mechanisms are temporary and exceptional. But they reveal, in reality, structural problems that had not been addressed until now, in particular the maintenance of low rates during an expansionary period, the uninterrupted supply of liquidity to financial markets by central banks or the rise in prices. real estate.
Milton Friedman (1912-2006), founder of the Chicago School, explained perfectly with the quantitative theory of money that a monetary increase ends, sooner or later, with a rise in inflation with this clear summary: “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can only be generated by an increase in the quantity of money faster than that of production”, so that the influx of liquidity into the markets automatically generates inflationary pressures.
Core inflation is rising around the world, with strains on commodities, energy and now wages. Several surveys announce that the inflationary expectations of economic players will adjust to the level of price increases.
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