Wanted: radical ideas for inflation modelling

Hedge funds echo Mervyn King’s calls for a new approach to inflation modelling post-2022 crisis

Why did nobody see it coming?

This famously straightforward question – posed by Queen Elizabeth about the 2008 financial crisis – could equally be demanded of the inflation crisis of 2022.

Central bank models had forecast a brief and ‘transitory’ inflation spike in the wake of the Covid pandemic and the various multi-billion-dollar stimulus packages put in place to help western economies. The monetary response remained relaxed and the post-2008 era of loose policy continued through 2021.


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