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Many economists are focusing on inflation as the major guide for how the economic situation post-COVID is going to evolve.
April’s CPI readings might be a bit too soon to measure the reaction to the massive amount of stimulus since most retail was closed during that period.
However, if inflation misses targets, it could have some important implications going forward. Both analysts who are in favor of high inflation in the future, as well as those supporting the view of another round of low inflation, agree that April’s consumer prices should diminish.
Lower inflation is likely already priced into the market. However, a surprise on the upside could drive markets.
On Friday, we got further evidence that the BOE isn’t concerned with price stability for the moment.
Chief Economist Haldane said that they were considering expanding asset purchases into riskier assets and negative rates. In parallel, the head of the OBR suggested that higher debt wouldn’t dete...
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