The past few decades have been marked by a combination of sustained disinflationary forces, but the picture in more recent years, and particularly since the pandemic, looks more mixed. Globalisation and the latest wave of technological progress are putting less downward pressure on prices than in previous decades, but at the same time, weak union power and the continued trend towards flexible labour markets mean the risks of wage-price spirals still look low. The key threat in our view is whether policymakers’ commitment to low inflation has begun to weaken, with those risks greatest in the US.
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