For more than three decades, expectations of moderate price growth in the US and other advanced economies have been sustained — not least by China’s integration into the global economy. Might China come to the rescue as the Biden administration seeks to open the fiscal floodgates?
The fiscal expansion in the US in response to the Covid-19 pandemic is like nothing seen outside of wartime. Further large-scale public spending will be needed to rebuild needed infrastructure, tackle climate change and create jobs.
However, some prominent economists are warning that government spending on such an extraordinary scale could fuel accelerating price growth and cause inflation expectations to become unanchored.
