Outlook 2024 – Consequences of the new inflation regime

The policy mistakes of recent years / Inflation: Something sticks

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Dr. Jörg Krämer

Commerzbank Economic Research

November 10 2023

Although the pandemic and Russia's war of aggression have reduced overall economic supply, central banks and finance ministers have fueled demand. The consequences of this policy will also shape the year 2024: Inflation will level off above the 2% mark and the real economy will suffer more than most economists currently expect from the expulsion from the paradise of low interest rates.

The development of inflation and the economy in the past two years cannot be understood without the previous history. In the years before the Covid pandemic, the actions of Western central bankers were characterized by the fear of supposed deflation. They invested huge sums in the purchase of government bonds and frequently lowered key interest rates into negative territory.

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