Containing inflation fears

With the continued decline in average incomes in 150 countries, a hike in inflation should not be a concern, if expectations are adequately managed and self-fulfilling prophecies are avoided.

A possible hike in inflation after years of maintaining low rates has been the subject of heated debate as one of the repercussions of the current Covid-19 pandemic and attempts to contain it. 

The shrinking world economy with a negative growth rate of 3.5 per cent in 2020 together with the decline in global inflation and the subsequent decrease in interest rates have encouraged governments, especially in developed countries, to increase public spending. The latest such increase was the recent approval by the US Congress of an additional $1.9 trillion package of spending to be pumped into the pandemic-stricken American economy. The package was approved after the US federal budget registered a deficit of $3.1 trillion last year due to spending on Covid-19 response.

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