Philip Lane on the Nature of Europe’s Double-Digit Inflation
IMF Podcasts
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Do You Think Demand-Driven Inflation Will Fall Back?
If inflation is high, there's a risk of what we call second-round effects. High inflation this year will lead to whether firms trying to raise prices next year. We cannot have living standards fall too much - wages must go up. But then we have to make sure that job is completed with monetary policy. If you have demand-driven inflation, essentially you need to squeeze the economy harder.
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