High US inflation should not be ruled out

Dollar balloon

While the longer-term effects of the Covid-19 pandemic on US inflation are highly uncertain, the prospect of a sharp increase in prices during the latter end of an expected recovery should not be ruled out.

The longer the health crisis continues, the more three inflationary undercurrents could build in momentum: a longer-term supply-side shock, significant monetary expansion and the potential for a release of pent-up demand. 

During the current containment phase of the pandemic, aggregate

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