A surge in the money supply has piqued fears of a leap in inflation. But in our view, there is little chance that this expansion of the money supply, driven almost entirely by quantitative easing, will lead to inflation because demand is very weak. There is a possibility that the combination of a large amount of excess reserves sloshing around in the banking system and loose fiscal policy will lead to higher inflation once the economy has recovered. But if that happened, policymakers would rein in the stimulus.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services