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Stagflationary BlowThe world economy is facing a buildup in stagflationary forces as surging energy prices boost inflation and slow the recovery from the pandemic recession.
“We’re seeing all of this inflation,” Supriya Menon, a strategist at Pictet & Cie. told Bloomberg TV. “Ultimately how does that get resolved? Part of the way it could get resolved is through demand destruction.”
Bank of England Governor Andrew Bailey highlighted the conundrum when he drew attention to the limits of monetary policy to deal with some of the factors causing higher consumer prices.
“The shocks that we are seeing are restricting supply in the economy relative to the recovery of demand,” he said Monday in speech. “This is important because monetary policy will not increase the supply of semi-conductor chips, it will not increase the amount of wind (no, really).”