Will Inflation Wither with Consumer Demand?

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Economic stimulus-debt paradox; inflation to weaken with demand?

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

The Economic Stimulus/Relief-Debt Paradox

  • Budget deficits are rising globally amid surge in sovereign debt issuance.
  • Countries spending trillions to mitigate economic impact of pandemic.
  • Long-term interest rates have remained low despite ballooning debt.
  • Are rising debt loads a sign central banks will keep policy rates low?
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Consumer Prices Set to Fall, Mute Inflation?

  • Demand for most non-staple goods, services has plummeted.
  • Economy could be heading for a transitional but intense drop in prices.
  • Inflation might be muted even as consumer spending makes a comeback.
  • Could deficit spending, expanded central bank balance sheet stoke inflation?
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