Why inflation usually retreats at a far slower pace than it goes up

Since the onset of the pandemic, inflation has significantly risen around the world. Global trends show that inflation is quick to rise, but very slow to fall. In an article for Mint, Dr Niranjan Rajadhyaksha, Executive Director, Artha Global, shares three broad learnings to be taken from these global trends.

Excerpts below:

“Much of the world is battling an inflation fire. The debate last year over whether the price pressures are transient or not has faded away. Now very few believe that inflation will go away on its own. The historical record shows that inflation moves up quickly but takes its own sweet time to come back down from its peak towards its target.”

“There are three broad learnings from the study of inflation surges. […] The broader global lesson is that even if we accept the optimistic view that inflation has peaked in many countries, the process of disinflation may be slower than what many in financial markets expect.”

Read the full article here.

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